The Faculty Lounge

New Study on the State of the Entry-Level Law-Jobs Market and its Implications (Part IV: What the Current State and Likely Future of the Law-Jobs Market Means for the Legal Academy)

This is the fourth in a series of what I originally intended to be four posts springboarding off my new study of the entry-level Law-Jobs Market.  I’m now planning a fifth (and if that’s what you have to look forward to, you have my sympathy).  The full paper is available here.  Part I laid out the current state of the job market, and you can find it here.  Part II was about “JD Advantage” placements, and you can find that here.  Part III made some predictions about where entry-level hiring is headed in the foreseeable future, and that one is here.

In the first post in this series, I showed you that the entry-level Law-Jobs market appears to have finally leveled out after a decade-long decline, but that the number of entry-level Law Jobs is now 25.7% lower than it was in 2007, and at levels not seen since the early 1990s.  The proportion of the graduating class getting a Law Job (the Law-Jobs Ratio) has recovered, but that’s only because of the crash in the number of people attending law school.  In short, there are way fewer entry-level Law Jobs than there were ten years ago, but even fewer people graduating from law school.  In the third post, I predicted that while the long, steep decline in entry-level hiring is probably over, the steady and rapid growth in the job market that preceded it for at least thirty years is not likely to return anytime soon.  Instead, we have reset to a new, more modest entry-level job market about 25% smaller than the one we had in 2007, one likely to show, on average, only gradual growth of perhaps 1%-2% per year.

So what does this mean for the legal academy?  I offer my reflections after the jump.

New Study on the State of the Entry-Level Law-Jobs Market and its Implications (Part III: The Future of the Entry-Level Law-Jobs Market)

This is the third in a series of what I intended to be four posts on my new study of the entry-level Law-Jobs Market (though I’m now thinking about a fifth).  Part I laid out the current state of the job market, and you can find it here.  Part II was about “JD Advantage” placements, and you can find that here.  The full paper is available here. 

In the first post in this series, I showed you that the entry-level Law-Jobs market appears to have finally levelled out after a decade-long decline, but that the number of entry-level Law Jobs is now 25.7% lower than it was in 2007, and at levels not seen since the early 1990s.  The proportion of the graduating class getting a Law Job (the Law-Jobs Ratio) has recovered, but that’s only because of the crash in the number of people attending law school.  In short, there are way fewer entry-level Law Jobs than there were ten years ago, but even fewer people graduating from law school.

Now it’s time to discuss where the entry-level Law-Jobs market is going.  I’ll give you my best guess after the jump.

New Study on the State of the Entry-Level Law-Jobs Market and its Implications (Part II: What the Market is, and What the ABA is Not, Telling Us about “JD Advantage” Placements)

This is the second in a series of what I intend to be four posts on my new study of the entry-level Law-Jobs market.  Part I laid out the current state of the job market, and you can find it here.  The full paper is available here. 

Today I’ll discuss so-called “JD Advantage” placements, what the job market is telling us about them, and what the available data is not telling us.

For those not entirely familiar, the ABA’s disclosure requirements call on reporting law schools to break down their recent graduates’ employment outcomes (among other ways) into four mutually exclusive categories:  Bar Passage Required, JD Advantage, Professional Position, and Nonprofessional Position.  The current definition of a JD Advantage position (see here at p.26) includes that its “duties . . . do not require passage of the bar exam or an active law license or involve practicing law”; but “[t]he possession of a JD by the graduate was sought by the employer, required by the employer, or provided a demonstrable advantage in either obtaining or performing the duties of the position from the perspective of the employer . . . .”  (For a history of the evolution of this job category, see my earlier job-market study at 555-59.)

I’ll talk about the problems with this definition, and what we do and don’t know about its application, after the jump.

New Study on the State of the Entry-Level Law-Jobs Market and its Implications (Part I: Where the Job Market for New Law Graduates is Today)

I’ve posted on SSRN a draft of my new study of the entry-level Law-Jobs market and its implications.  You can find the draft here.  It’s a followup to my earlier study on the job market, published in the middle of the Great Recession’s aftermath in 2014.  I presented an earlier draft of the new paper last spring at Florida International’s Summit on the Future of Legal Education and Entry to the Profession.  That conference was ably organized by Scott Norberg and generously co-sponsored by LSAC.  The paper will appear later this year in the Symposium Issue of the FIU Law Review devoted to the Summit.

Rather than imposing one long post on those interested, I thought I would break a discussion of the findings into four parts, posted over the next week or two.  This Part will discuss the current state of the entry-level Law-Jobs market.  Subsequent posts will discuss (ii) the entry-level placements the ABA calls “JD-Advantage”; (iii) predictions regarding future trends in entry-level employment for new law graduates; and (iv) the implications for the legal academy of where the job market is and where it’s going.

So where are we these days?  I’ll fill you in after the jump.

A Glimpse at the Future of BigLaw

Recently New York behemoth Weil Gotshal & Manges announced that it was “shortening its partnership track” from 9½ to 7½ years.  Commentators have responded skeptically (law-firm consultant David Barnard of Blaqwell doubts whether the approach will improve overall associate retention; Vivia Chen says “all this just sounds too peachy to be true”). 

I think the doubters are wrong, and that while Weil’s “partnership track” change (I’ll explain the reason for the scare quotes later) may not be that big a deal by itself, the reasons for it that the firm has plausibly articulated and their broader implications mark important evolutionary developments that we can expect to become more widespread in the industry. 

As part of the great educational machine that manufactures new lawyers, we law teachers should want to know whether any of this is good for the young lawyers entering BigLaw.  Our students will naturally want to know as well.  As I’ll explain after the jump, the answer is yes and no, but the no is mainly a function of the economic environment to which all BigLaw firms must react these days (and thus isn’t really a result of any law-firm policy or policy change), and the yes is important and being largely overlooked.

Did Pepper Hamilton Really Just Say That?

The last decade or two has seen unprecedented consolidation in BigLaw.  Moderate-sized regional firms have joined forces (think Syracuse’s Bond Schoeneck & King and Buffalo’s Jaekle Fleischmann & Mugle); larger firms have devoured smaller and medium-sized practices (think Arnold & Porter and my own dear departed Howard Rice); and we’ve even had a bit of an international orgy among the giants (while you’re trying to get that image out of your head, think DLA Piper; Hogan Lovells; Dacheng Dentons).

I don’t intend to write today about whether these combinations are a good idea.  (As an aside, I would say that some are, and many are not; and among the some that are, many have been executed in ways that throttle much of the value the combination might have created.  Along with a number of others, Steve Harper (for example, here) and Bill Henderson (for example, here and here) have written about this problem thoughtfully.  I’ve addressed the issue obliquely (for example, here at pages 14-18, 70, and here) and I intend to get back to it someday if I ever conclude I have anything useful to add.)  What I do intend to comment on today are the organizational mating rituals with which BigLaw firms are so familiar from playing wingman to their clients, and more recently have begun to indulge in themselves.

In an atmosphere from which record numbers of lateral hires and law-firm mergers have emerged most years since the turn of the century, some big-on-big courtships inevitably fail (think Pillsbury Winthrop and Chadbourne & Park; Dickstein Shapiro and Bryan Cave; Orrick Herrington and pretty much everybody).  There are, of course, all kinds of reasons that partnerships don’t partner:  The conflicts of interest that arise from combining two large firms’ client lists can prove unmanageable; differences that emerge during discussions about firm economics or culture may sour the mood; even status issues about who will be considered primus inter pares in the often talked-about but rarely seen Merger of Equals can kill the deal.

The customs of the aftermath are fairly well understood.  Occasionally both firms say nothing, leaving the trade press to speculate from murmured rumors until a manager reluctantly confirms.  Sometimes the firm with fading ardor (or that has altered in its appetites to cherry-picking from devouring the entire tree, deadwood and all) matter-of-factly reveals that discussions are over, or in some odd cases suggests they never began.  More often, the two firms issue joint or coordinated statements declaring the end of the affair, expressing—whatever frustrations they may actually harbor—mutual respect and regret at what they were unable to achieve.  Whether unilateral or cooperative, the announcement almost always has the clubby feel of having been delivered in a paneled conference room.  Strictly business, old chap; pity.

So imagine my surprise when I read about Pepper Hamilton & Sheetz’s press release announcing that Reed Smith (in the Eagles’ timeless formulation) was going to have to eat its lunch all by itself:

Today, Pepper Hamilton decided to end our discussions with Reed Smith. While we were intrigued when Reed Smith approached us, we determined that moving forward is not in the best interest of Pepper. Pepper prides itself on talented people providing premier legal services to our clients. These core Pepper values are what we do best, and it is why our firm is held in such high regard by our clients and the entire legal community.

In contrast, Reed Smith’s contemporaneous (and apparently slightly earlier) press release adhered closely to the conventionally polite: “[I]n order to better serve our global clients,” the firm stated, it “periodically has discussions with other firms regarding joining forces.” Reed Smith said it had had “preliminary” discussions with Pepper Hamilton, a firm it said it knows well and respects. 

In case you missed it, let’s compare:  Reed Smith said “[w]hile our conversations with Pepper Hamilton were positive and informative, both firms have concluded that for a variety of reasons those discussions should end.”  Pepper Hamilton proclaimed that it had broken off discussions because a merger was “not in the best interest of Pepper,” which after all has “talented people” who provide “premier legal services” and is held in “high regard by our clients and the entire legal community.” 

Wow.  What prompted Pepper’s little outburst?  I have no idea, and have spoken to no one at either firm about it.  Maybe Pepper considered Reed’s expectations for the combination overreaching given the disparity in their recent financial performance—Reed’s profits per partner fell 8% last year and it recently laid off 45 lawyers.  Maybe Pepper thought folks at Reed were whispering things inconsistent with the equable tone of Reed’s press release.  Or maybe Pepper is just plain arrogant or tone-deaf. 

To be clear, there is nothing tortious or unethical about the substance or tone of Pepper Hamilton’s announcement so far as I can tell.  It just wasn’t very classy.  Some of us expected more from a firm we are assured is held in such “high regard by . . . the entire legal community.”  O tempore; o mores.

--Bernie

The Law of Legal Services

In response to my post about the unauthorized practice of law, Andrew Perlman sent me a copy of his recent article, Towards the Law of Legal Services. This is an excellent piece, with several thoughtful insights. Andy suggests that, rather than continue fruitless attempts to define the "practice of law," we should identify the different legal services that consumers need, decide who should be authorized to perform each those services, and determine the appropriate regulation (if any) for those providers. This nuanced "law of legal services" would replace the binary "law of lawyering."

I like Andy's proposal for the reasons I explain below. I also explore the role that legal educators could--and should--play in achieving this reform.

The Bias in UPL Laws

I was pleased to see Bernie's post on the Lola case; prohibitions against the unauthorized practice of law (UPL) raise a number of provocative issues. Here's another UPL issue that I have been thinking about: Organizations are able to employ large cadres of non-lawyers to do legal work, while individuals cannot. This discrepancy prompts me think about who we protect from the unauthorized practice of law, why we offer those protections, and whether the protections should remain.

Lola Wage-and-Hour Document Review Case Settles; Vexing Questions About What Constitutes “The Practice of Law” Persist

Lola v. Skadden Arps has settled (reports here and here).  Lola is a wage-and-hour case with wide implications for the legal profession.  To recap (see my previous post on the Second Circuit’s recent decision here), David Lola, a lawyer licensed to practice in California, took a job as a document reviewer for Skadden Arps in a large MDL venued in a federal court in Ohio.  He was placed in that position with Skadden by a staffing agency, Tower Legal Staffing.  (Tower Legal provides attorneys and paralegals to law firms on a contract basis, and thus remained Lola’s direct employer during his period of service to Skadden.)  Lola spent 14 months reviewing documents in North Carolina for the case; his Complaint alleged he typically worked 45-55 hours per week.  He was paid $25 per hour, without overtime.

After the engagement ended, Lola sued Skadden and Tower Legal in a Fair Labor Standards Act “collective action,” which is the FLSA’s statutory version of a class action (see 29 U.S.C. § 216(b)).  Lola claimed that he and all those similarly situated were entitled to time-and-a-half for work in excess of 40 hours per week. 

The FLSA exempts from overtime requirements any “employee employed in a bona fide professional capacity,” including “any employee who is the holder of a valid license . . . permitting the practice of law . . . and is actually engaged in the practice thereof . . . .”  29 C.F.R. § 541.304.  Skadden and Tower Legal argued that Lola’s document review responsibilities constituted “the practice of law” within the meaning of the FLSA and supporting regulations, and he therefore was exempt from overtime pay. 

Lola admitted that he was licensed to practice (the fact that it was in a jurisdiction with no connection to any aspect of his work doesn’t matter under the FLSA), so the wage-and-hour question boiled down to whether or not he was “actually engaged” in the “practice of law.”  Lola alleged that his responsibilities as a document reviewer were completely mechanical and devoid of judgment—that he was given a list of key words and names and told to “code” documents in a specified way if those words or names appeared in the document.  Period.  On a motion to dismiss (where these allegations had to be taken as true), the District Court found that these activities constituted “the practice of law.”  The Second Circuit reversed, finding that work that ministerial and rudimentary did not comprise the practice of law, though more typical document review work requiring “a modicum of judgment” likely would.  (As related in my earlier post, most document review jobs do involve some degree of judgment in determining documents’ responsiveness to a request or potentially privileged status, judgments that a fair reading of the appellate opinion suggests would qualify as “the practice of law” under the standard the decision articulates.  The Second Circuit agreed with the District Court that the FLSA borrows the law of the state governing the services at issue to determine whether they qualify as “the practice of law,” which in this case was North Carolina, though North Carolina’s definition is typical in most respects.)  The case was remanded to determine whether Lola’s job required him to be the automaton he alleged.

I'll address the settlement and what it does and doesn't tell us about the future after the jump.

Law Practice Management

I'll return to my discussion of law school admissions soon, but another topic interests me tonight. Should law schools offer courses in law practice management? Some schools do, and it seems to me that all schools should. Why? Three reasons.

First, managing a law practice is different from running any other type of business. It's that pesky professionalism thing again. Lawyers need to integrate their self-interest in running a profitable business with their obligations to colleagues and clients. If we want lawyers to run their businesses in an ethical manner, we have to offer courses that teach management principles in the context of legal ethics; we can't simply tell law students to take a management course from the business school.

Drafting Lessons

 It all started with the committee assignment from hell.  When my dean asked me co-chair the Strategic Planning Committee a few years ago, neither of us could know that it would transform  my own teaching and scholarship, nor how. 

For at least a decade I intended to add drafting exercises into my Commercial Law and Contracts courses, but getting my book Love’s Promises out the door and other teaching and administrative obligations kept it on the back burner.  It took the relentless talk about curricular and other reforms in those weekly Strategic Planning meetings to overpower my worries about the steep learning curve and crowding-out of other scholarly and teaching projects. 

I little guessed that it was not a zero sum game.  Instead, learning to teach students how to create the documents that memorialize a commercial transaction changed my scholarship and other teaching in profound and positive ways. 

At the same time that I came to see the de-lamination of my notes as an ethical imperative, the ABA and the California Bar were cooking up new course requirements.  Accredited schools must offer 6 credits of transition-to-practice coursework and admission to the California Bar requires 15 credits that include topics like negotiation and drafting of contracts and other legal instruments. 

Professors across the curriculum are busy figuring out how to meet these requirements, each of us working within our fields of expertise and from our own backgrounds in practice.  I’ve teaching been Contracts and  Commercial Law (mostly Secured Transactions) for two decades, and before that I was in the Credit Recovery department of a big firm.  Sitting on the Appointments Committee over the years, I’ve noticed that most of us tenured and tenure-track come from litigation backgrounds, and for all but the junior faculty that was a while ago.  The question is how we who have not practiced in decades can help our students enter that arena.

One option is to give up before we start.   I spent much of my first decade teaching a lot like my professors taught me in the 1980s, and as their professors taught them in the 1950s and ‘60s, and so forth, all the way back to Langdell.  Top-tier law schools with big endowments may be able to hire a staff of legal drafting instructors on contracts, a parallel to the non-tenure-track faculty who teach students to write memos during their first year.  But the 2008 financial crisis and declining enrollments put this option out of reach for most of us.  

Another option is for us middle aged dogs to learn a few new drafting tricks.  I did, and am here to say that learning to teach contract drafting required me to adopt new ways of thinking that those insights have only enriched both my doctrinal teaching and my scholarship. 

But a paradox stands in the way for many so-called podium teachers.  Some think that learning to teach drafting and its increased grading is too hard.  Others, in contrast, see it as too easy, mere ministerial scrivener’s work that is unworthy of a true scholar’s attention.  In my experience both of these views are mistaken.  As Kwame Anthony Appiah put it in the NY Times magazine Education issue, universities can, should, and do focus on both utility and utopia.  Our students take on monumental debt both to earn a living and to practice a profession that protects sacred values like justice.  

How Drafting Lessons Helped my Scholarship

Figuring out how to teach drafting helped me think more precisely about writing for particular readers by shaping a voice, format and substance.  That new focus helped me to write a trade book that aims to get a distilled version of the law review articles I’ve written about family agreements out to non-lawyers who could benefit from knowing a few things about assisted reproduction, adoption, cohabitation and marriage agreements.  (A 3-minute video demonstrates that voice and format.) 

These changes happened incrementally.  First I taught a three-credit drafting seminar with Olivia Farrar of Howard University Law School, who also teaches a drafting boot camp here at the University of Maryland.    We created a hypo that required students to negotiate and complete the documentation for forming an LLC that purchased a medivac helicopter with seller financing.  That course taught me much more than how to translate a business deal to contractual concepts and then to words on the page.  In addition to learning that aircraft owners have to be US citizens, I discovered that my casebook did not convey crucial information that students need.  For example, few of them realize that messing up some clauses is fatal – and likely malpractice – nor the ways that doctrine dictates which clauses are core provisions.  (Although Secured Transactions was a pre-req for the course, only a handful of students understood that failing to define an “obligation” secured by collateral meant that the whole effort was not worth the paper it was written on.)  

Drunk on that Kool-aid, I added a 1-credit drafting workshop to my Secured Transactions course.  As with the seminar, students created a portfolio of documents that would memorialize a financed sale transaction, though the workshop syllabus was considerably slimmer than the seminar one.  The workshop is open to students in my class, and about half sign on each time I teach it.   

Fortunately, I teach at the University of Maryland law school, which has long been a leader in clinical education and other experiential pedagogy.    The administration backed my efforts to learn the ropes of contract drafting by giving full teaching credit for team –teaching that first seminar, hiring a Teaching Assistant to hold office hours with students and help with administrative matters like electronic submission of assignments, and letting me add an extra credit to my Secured Transactions class.

But not every professor is as evangelical about drafting.  Nor does every law school have the resources to support faculty in devising curricular reforms from scratch.

I’m writing a book to make it easy for people like me: doctrinal professors who want to add some transactional drafting exercises to reinforce doctrinal and theoretical materials and send students into their job search with a transactional writing sample and into practice knowing the difference between a representation and a covenant.  The exercises are modular so that professors can start with one and then add more in future semesters.  For enthusiasts I’m including exercises that can be ratcheted up to mirror complexities of practice.

What Do Law Professors Want?

Now that I know to tailor a book to reach a particular group of readers, I’m using this guest blogging gig at Faculty Lounge to solicit your thoughts about what would work in your classroom.

--  Would you prefer to add on a 1-credit drafting workshop, or to integrate materials into the casebook material you already cover?

 -- Would it be helpful to get tips about reducing time grading, such as having students negotiate as teams and turn in an assignment together?

 -- How many hours in a semester do you anticipate being willing to grade transactional exercises as part of your existing course?  As a 1-credit add-on workshop?

     --   Ten?  Twenty?  As many as 40?

-- Are you likely to direct your students to on-line multiple-choice questions on drafting if it reduces time you spend explaining the concepts?

 -- What else should I include (or exclude) to make this book user-friendly?

If you’d like to communicate with me directly about your own experiences teaching drafting, don’t be shy.  My email is mertman@law.umaryland.edu. 

I look forward to drafting on your thoughts and experiences.

When Is Document Review The “Practice Of Law,” And When Is It The “UNAUTHORIZED Practice of Law”? The Answers May Surprise You.

Yesterday the Second Circuit decided Lola v. Skadden, Arps, Slate, Meagher & Flom LLP, et al., a case rich in ironic implications.  (Hat tip to my friend Matt Sawchak at Campbell Law for the heads-up.)  The Slip Opinion is here.  A lot of people are going to try and tell you that this case holds that document review is not the “practice of law”; Above the Law already has (see here).  But that grossly oversimplifies everything that’s important about it.  What the decision actually does mean is much harder to discern, and once you figure it out it is very hard to justify.

Let me start by telling you what Lola is about.  David Lola is a lawyer licensed to practice in the State of California.  He took a position as a document reviewer for Skadden at $25 an hour.  Skadden was involved in a big case in the Northern District of Ohio, and sent Lola to work on a huge document review that took place entirely in the state of North Carolina and lasted well over a year.  Lola typically worked 45-55 hours per week, and was paid no overtime. 

Lola eventually sued on behalf of himself and all others similarly situated for what these days is popularly referred to as “wage theft,” specifically and more technically violations of the federal Fair Labor Standards Act.  The FLSA requires employees with the right kind of responsibilities to receive time-and-a-half for work in excess of 40 hours per week.  The legal question presented is whether Lola did the right kind of work to be entitled to overtime.  Long story short on the legal standard, certain kinds of professional work are exempt from the FLSA overtime requirement, specifically including the “practice of law.”  So if Lola was engaging in the “practice of law,” he was exempt from any right to overtime; if he was not “practicing law,” and was engaged in merely clerical or other ministerial tasks, he was entitled to overtime, and presumably so would quite a few other document reviewers who work long hours for Skadden and other BigLaw firms on the document-heavy litigation in which they often are involved.

One big problem is that any meaningful definition of “practicing law” is (to put it politely) elusive, and the Second Circuit’s decision provides surprisingly little help in determining when the very common task of document review is or is not “practicing law” for any purpose. (A quick aside:  The Second Circuit’s decision holds that the FLSA incorporates state law to determine when an employee is “practicing law” and thus exempt from overtime, and gives useful guidance on which state’s law a federal court should choose.  In this case, the state law at issue is North Carolina’s, where all the document review work at issue was done.  But North Carolina's definition of "practicing law" is similar to most states'.)

It’s the specific circumstances of this case that make the opinion so difficult to understand and apply more broadly:  The District Court granted a motion to dismiss for failure to state a claim, so the Second Circuit is of course obliged to take the facts as the plaintiff pleads them.  And Lola is at pains to allege in his Complaint that his work as a document reviewer accorded him no room at all for judgment or discretion.  Streamlining just a little, he essentially asserts that he was handed piles of documents and lists of key words chosen by others, and instructed that if a document contained a particular word, he should “code” it into a particular category.  Just that simple, just that rote. 

That kind of arrangement is not unheard of, but it’s hardly typical.  Usually, document reviewers are asked to make at least preliminary determinations about whether documents might be responsive to a document request, might pertain to a particular subject, or might be privileged.  All of those tasks involve the exercise of legal judgment (that is, interpreting the scope of the document request and the document to determine if it falls within the terms of a particular demand or pertains to a subject of interest, or applying the law of privilege, all of which can be quite subtle and difficult, and frequently demand analysis and judgment) applied to the specific facts of the case (that is, the specific documents on the document reviewer’s desk or screen).  And the nub of the Second Circuit’s decision is that the “practice of law” under North Carolina law (which is typical of most states’ definitions) must involve “at least a modicum of independent legal judgment” by applying general legal principles to a specific client’s particular circumstances.  Thus the Second Circuit concludes that some document review—including the kind I just described as typical—does amount to the “practice of law,” but the more limited activities described in Lola’s complaint do not.

That doesn’t mean (and c’mon, you had to know it was coming) that whatever Lola wants, Lola gets.   Skadden remains free to prove on summary judgment or at trial that, despite what Lola alleges in his Complaint, in fact it called upon Lola and those similarly situated to exercise that “modicum of independent legal judgment” typical of much document review that would free Skadden from paying them overtime.  How much “independent legal judgment” amounts to the legally necessary “modicum” under all the prevailing facts and circumstances (with possible interjurisdictional variations for different workers in different places assigned to the same case based on differing state-law standards) is nobody’s fantasy of a predictable outcome. 

And the Second Circuit provides us with no effective guidance on how much a “modicum” is.  The closest we get to even a vaguely functional test is this:

“A fair reading of the complaint in the light most favorable to Lola is that he provided services that a machine could have provided. The parties themselves agreed at oral argument that an individual who, in the course of reviewing discovery documents, undertakes tasks that could otherwise be performed entirely by a machine cannot be said to engage in the practice of law.”

It is not clear whether the Second Circuit intends this “machine” test to define the outer limit of what is not “practicing law,” or whether it intends it merely as an example.  Either way, it’s worthless.  Does a legally-related task need to be so devoid of any judgment that a truly dumb machine could do it in order for it not to be “the practice of law”?  That’s an awfully low bar, and it means that most people working for lawyers today are “practicing law” for wage-and-hour purposes, and exempt from the right to overtime.   Virtually all secretaries and legal assistants, for example, could not be replaced by dumb machines; if they could have been, they would have been by now.  (This is one reason why I suspect Lola’s allegations may not prove out as neatly as he might like—it seems implausible that a firm as sophisticated as Skadden would have paid large numbers of people $25 per hour to do something that could be accomplished more cheaply and accurately by nothing more than an optical-character reader and word-search software.)  And why should the standard for “practicing law” be so strictly dependent on the rapidly developing state of computer technology?  There already exists today “Predictive Coding” software that allows a machine (a computer) to make complex preliminary judgments about privilege and responsiveness.  On that standard, Lola was not “practicing law” on either party’s version of the facts (because “a machine” could do whatever he turned out to have been doing).  The lawyer representing Skadden should never have conceded at oral argument that the “machine” test is a proper standard for anything—he or she may have given away the overtime store to save one remote corner. 

So Lola v. Skadden actually tells us next to nothing about when document review is the “practice of law.”  But there is yet another, more subtle, reason why the Second Circuit’s standard makes no sense:  The Second Circuit borrows the “modicum of independent judgment” standard from the state law defining what kinds of activities comprise “practicing law” for the purpose of determining when the person undertaking those activities needs a law license to do them, and then inexplicably misinterprets it.  If Skadden is factually right that Lola was exercising a “modicum of independent legal judgment” and was therefore “practicing law,” then he was practicing law without a license (something commonly referred to as the “unauthorized practice of law,” or UPL, and remember that Lola was licensed in California, but not in North Carolina where he was working and whose law governs whether he was “practicing law”).  Unauthorized practice is a misdemeanor in most states, and Skadden is effectively confessing to aiding and abetting it hundreds of times a day.  And if any person who is making preliminary judgments about responsiveness or privilege, or preparing drafts of contracts or pleadings, is “practicing law,” then countless legal secretaries and paralegals all over the country have been practicing law without a license for at least a century.

But wait, you say, that can’t actually be the law.  Well, you’re right.  In every American jurisdiction I know of, if a lay person selected by the lawyer applies legal principles to the client’s specific circumstances under the lawyer’s supervision, the lawyer rather than the subordinate is the one “practicing law.”  With a skilled secretary or paralegal and a responsible supervising lawyer—and there are hundreds of thousands of both all over the country—this supervisorial arrangement works just fine, saves lawyers a lot of time, and saves clients a lot of money.  Thus a North Carolina State Bar Formal Ethics Opinion on which the Second Circuit in Lola expressly relies (and which is replicated in a number of other states) holds that a North Carolina lawyer may outsource document review to a foreign legal process firm (say, Pangea3 in India) staffed by numerous people there the lawyer has never met who are licensed to practice in no U.S. jurisdiction, so long as the North Carolina lawyer adheres to the applicable “selection and supervisory requirements.”  And there’s always been a fair amount of play in determining how much “supervision” of lay staff by the licensed lawyer is sufficient, with the minimum consistently set a lot lower than you’d probably think to accommodate what’s actually been going on above-board and successfully as long as anyone can remember.

From this you might infer that someone without a law license in the relevant state and who is exercising “a modicum of independent legal judgment” under a licensed lawyer’s supervision is not “practicing law”—after all, if he were, then he would be “practicing law” without a license, and his employer would be aiding and abetting a crime.  Yet Lola stands squarely for the proposition that, if David Lola’s document review involved the exercise of even a “modicum of independent legal judgment,” then Lola was “practicing law” under the state-law standard for what comprises activities that must be undertaken with a law license, regardless of the fact that Skadden lawyers were supervising his work in a manner universally viewed as proper. 

In short, either all those document reviewers are “practicing law” without a license under the governing state law the FLSA borrows, and Skadden (while it need not pay them overtime) is the mastermind of an ongoing criminal conspiracy unless henceforward it hires only document reviewers who are licensed to practice law in the state whose laws govern the service provided, or else none of the document reviewers are “practicing law” and they should all get overtime.  But you can’t have it both ways.  In this commentator's humble opinion, the Second Circuit screwed the pooch. 

The better answer, of course, is that—consistent with state law on what comprises practice and unauthorized practice all over the country—document reviewers who are properly supervised by licensed lawyers are not “practicing law” precisely because they are properly supervised.  But that means the doc reviewers should all get their time-and-a-half.

Of course, if properly supervised document reviewers don’t need a law license to do their work—which is pretty clearly the case in most if not all states—then their law schools should not be reporting them as holding Bar Passage Required jobs.  In fact, since they’re doing work that is indistinguishable from work that legal assistants and legal secretaries have done for a hundred years and are still doing, it’s a big, ugly stretch even to call those jobs “JD Advantaged,” unless you’re prepared to call legal secretary and paralegal jobs “JD Advantaged” too.  Which no one in their right mind should.  Should they?

--Bernie 

Responses to the Dewey Trial Survey

Response to our Reader Survey predicting outcomes in the Dewey LeBoeuf trial was less than robust—just a couple dozen of you registered your views.  But the trend in our admittedly small  sample is clear:  In Megaphone Mark Slackmeyer’s timeless words, “That’s Guilty! Guilty, Guilty, Guilty!!”

About 80% of respondents opined that former Firm Chair Steven Davis would plead to or be found guilty of all or some of the charges he faces.  Davis is the manager against whom we’ve seen the least evidence so far of knowledge or complicity (though I wouldn’t say we’ve seen none, and we still have a long ways to go).  About 90% of respondents believed that former CFO Joel Sanders would plead to or be found guilty of some or all of the charges.  And (count ‘em) 100% of you think former Executive Director Stephen DiCarmine is headed for the Big House. 

The differences among your assessments of the defendants' chances are interesting because it bears remembering that Sanders is a CPA as well as a lawyer, and was in charge of the accounting function at the firm.  The upper-middle managers who have pleaded guilty appear to be saying that Sanders signed off (figuratively, if not literally) on the bad things they admit being a part of, though only some have testified so far.  If I were handicapping the Race to Rikers at this point, I’d have put Sanders in the lead.  (And no, I don’t think any of these guys will literally spend time in Rikers Island if convicted; they seem more likely destined for some minimum-security facility.  Readers familiar with the New York prison system may have more sophisticated guesses than mine.)

Judging from the daily news reports, the skilled and aggressive defense lawyers are making a few points here and there, but they don’t seem to be racking up the kind of score needed to win over the jury.  The prosecution is methodically presenting a fairly textbook case of accounting fraud; it may not be flashy, but it seems to be getting the job done.  Whether the People will inject some emotional oomph at some point remains to be seen.  The direct victims of the fraud were the bank and other financial institutions that loaned the Dewey firm the lost money--not  the most sympathetic victims you ever saw.  But thousands of Dewey employees lost their jobs in a depressed economy as a result of the piggery of a fairly sizeable cadre of partners (most of whom were not part of the criminal conspiracy alleged in the pending trial) who demanded too much and provided too little in return, and that was enabled by the accounting fraud the prosecution is presenting. 

One thing we’re not seeing is anyone who had the courage or the vision to call out the nonsense while it was going on.  That’s interesting—even Enron had Sherron Watkins.  It bears considering why, so far was we can tell, no one at Dewey said a word.  What was it about this place that stifled, or lulled, any hint of dissent?

I’ll report further as time and interest dictate.

--Bernie

How Will The Dewey Trial Turn Out? A Reader Survey

The lawyers are out of the starting gate, but there's still time to predict the outcome.  Below is a survey on how the Dewey trial is going to turn out (see my post from Friday on the beginning of the trial here).  The survey will be open for the next week, until midnight on Monday, June 8.  Results will be shared that week if there are enough predictions to make it meaningful.

Scroll down and make sure you complete the survey as to each of the three defendants!

Create your own user feedback survey

The Dewey LeBoeuf Trial Begins

Students of BigLaw Behaving Badly will have noticed that the trial on financial fraud charges of three top managers at the failed Dewey LeBoeuf firm has begun.  Former Firm Chair (managing partner) Steven Davis, Executor Director Stephen DiCarmine and Chief Financial Officer Joel Sanders—essentially the CEO, COO and CFO of the law firm—have been charged with fraud, theft, falsifying business records and conspiracy by the Manhattan District Attorney.  Needless to say, these are serious felonies.  A jury has been empaneled, and opening statements were delivered earlier this week (see here and here).

The gist of the charges is that Davis, DiCarmine and Sanders oversaw the falsification of the firm’s accounting records by reclassifying various categories of non-income as income.  The purpose of these accounting tactics, the prosecutors allege, was to mislead the firm’s lenders that the firm was in compliance with its financial covenants (that is, in good enough financial condition that the lenders did not have the contractual power to “call” their loans and demand their immediate and full repayment).  Lest this seem like small beer, it’s worth remembering that Dewey was a billion-dollar business with a $100 million bank line, and another $150 million in privately-placed debt securities.

A year ago when the indictments were handed up, I posted an essay in this space about the nature of the charges, and some ways in which they appeared to be unusual for a large institutional law firm.  Part of my point was that, while it’s not unusual in the annals of financial crime for ordinary nonprofessional businesses to cook their books in order to protect their access to outstanding lines of credit, the financial frauds that lawyers commit as lawyers usually involve different kinds of victims and motives than this one did.

Once you see this mess as a fraud by a business on its lenders, though, the opening statements are (judging from the media reports, at least) about what you’d expect.  The prosecutors promise to prove that the firm’s top management orchestrated, or at least countenanced, serious accounting mischief because the firm’s survival depended on keeping the firm’s credit lines open and outstanding.  And they will produce a half-dozen employees not all that far down the food chain (including the firm’s finance director and comptroller), who have already pleaded guilty, to explain the fraud and the top dogs’ involvement.  Davis and DiCarmine have offered the traditional “Splendid Isolation” defense—it’s lonely at the top because no one ever tells you anything, or at least tells you anything clearly enough so you can appreciate, with the limited financial acumen characteristic of those running billion-dollar partnerships including some of the most sophisticated lawyers in the world, that the only thing standing between your empire and catastrophic loan defaults that will precipitate an immediate financial collapse is some bald and indefensible accounting fictions (yeah, you’re right; their lawyers didn’t put it quite like that). 

CFO Sanders’ defense is more difficult and seems less clear.  He is a Certified Public Accountant who was in charge of the firm’s accounting function.  This likely makes it a lot harder as a practical matter for him to claim that he didn’t have some sense of what was going on or understand its significance.  His lawyer suggested in opening that he was just doing his job to keep the firm afloat during difficult financial times, and couldn’t really have believed there was anything untoward going on because he dealt with the lenders and agreed to their right to examine the firm’s records.  Because no real fraudster ever thinks he can avoid getting caught (yeah, you’re right again; his lawyer didn’t say that last part either).

The prosecution faces the classic challenges of a big financial fraud case—the facts are voluminous, intricate, and depend on accounting principles that seem at best arcane to ordinary jurors.  On the plus side of the prosecution’s advocacy ledger, the defendants may be expected to excite very little juror sympathy:  They’re lawyers.  They’re rich lawyers.  They’re rich lawyers who were pulling down millions of dollars a year during the Great Recession.  They’re rich lawyers who were pulling down millions of dollars a year that depended on a continuing survival of their empire.  They’re rich lawyers who were pulling down millions of dollars a year that depended on a continuing survival of their empire through tactics that some jurors may associate (albeit inaccurately) with the financial and lending misconduct that drove us into the Great Recession.

In the tradition of handicapping horse races like these, I invite readers to predict the outcome in the Comments.  Make sure you break down your prediction by defendant (and, if you think it will vary, by the kind of charge).  You can explain if you want, or just prognosticate.  I can promise that there will be no reward, or even recognition, for those who prove most prescient.  [Update:  To make this easier, I've added a Reader Survey on the Lounge here.  Just click to predict.  Make sure you scroll down and make your predictions as to each of the three defendants.]  

The trial is expected to last five or six months.  The lawyers involved are experienced and highly regarded, so it should be a good show.  I’ll try to comment from time to time, so stay tuned.

--Bernie

Diversity In The Legal Profession

Deborah Rhode has an op/ed up at the Washington Post arguing that the legal field is the least diverse profession and making the case for changes.  It's here.

Much Heat, Some Light in Resurgent Law-School Eschatology Debate

There has been a flareup in the debate over the purpose and value of law school.  The new discussion has been prompted by a series of posts by Michael Simkovic on Brian Leiter’s Law School Reports in which he summarizes and elaborates on his work with Frank McIntyre in two recent articles, “The Economic Value of a Law Degree” and “Timing Law School.”  (You can get Mike’s complete set of posts—there are, by my count, 14—on Leiter’s blog by starting here (posted March 19) and scrolling up.  Paul Caron has collected links to commentary on the commentary from both sides of the debate here, not all of which are subject to the objection I register below.)

Full disclosure at the outset:  Mike Simkovic visited with us here at UNC last term, where he proved himself an excellent teacher and an engaging colleague.  I consider him a friend.  Of course, I don’t always agree with my friends on everything (maybe that’s why I have so few), and as you’ll see I don’t agree with Mike about everything he’s written.  (Editorial Aside:  I recognize that there may be no intrinsic reason why anyone should care whether I agree with Mike or not.  But since you’re reading this, I’ll indulge the fantasy that you’re a little bit curious, if not about whether then at least about why.)  All that said, anyone with any intellectual honesty must appreciate the importance of Mike Simkovic’s recent contributions to the ongoing public discussion on the purpose and value of legal education.  His work (and let’s just agree that from here on “he” stands for both Mike and his co-author) is by my lights the first serious, empirically grounded, methodologically thoughtful showing that things—at least some things for at least some people—may not be quite as bad as some of us have feared.

Predictably, extremists on both sides of this longstanding debate have popped up to demonize or deify Prof. Simkovic and his work, vilifying or vaunting his motives and methods in sweeping and categorical terms.  I have only one request of all of you—please stop.  Stop the toxic name-calling.  Stop erecting effigies of your adversaries’ graves so you can dance on them.  The subject is much too important to be obscured in petty rivalries.  You’re not enlightening anyone, and it’s way too early to claim a victory lap, let alone drag your enemy in circles at the back of your chariot for the next nine days.  (I, at least, perceive Mike as having managed to hold himself mostly above the fray thus far, with only an occasional descent into the snippy or snide when goaded a bit too much.  But that happens to all of us now and then—not least, I regret to say, your not altogether gentle scribe.  I hope we’ll both try harder from here on out.)

In order to keep length manageable, I propose to share several posts over the next couple of weeks with some thoughts on Mike Simkovic’s important contributions.  I’ll try to point out some of the questions I think his work addresses, and the questions we still need to explore.  Like it or not, this kind of discussion tends to crowd out those prone to announcing that each new datum proves them right about everything all over again.

I’ll conclude this post and set the table for future ones by summarizing Mike’s principal conclusions in broad strokes.  “The Economic Value of a Law Degree” uses some accepted techniques of labor econometrics and a federal government dataset to compare the earnings differential over an entire career of people who get a law degree compared with people who end their higher education with a bachelor’s degree.  The paper concludes that, whether or not the JDs work as lawyers (and taking into account the costs of law school), a significant majority of them earn appreciably more over their careers than the BAs do.  “Timing Law School” builds on these conclusions, and determines that it is not possible to predict a better or worse time to attend law school in order to maximize your lifetime earnings.  That is in part because, the study finds, while those who graduate law school into a bad economy suffer some early hits to their earnings and their earnings advantages over BAs, and those who graduate law school into a booming economy enjoy some corresponding early advantages, these differences tend to moderate and then disappear over the longer run of a full career—again, whether or not the JD practices law.  (It’s also because it proves to be just as hard to time the labor market as it is to time the stock market; that is, to the extent starting your law career in a better or worse economy affects your overall lifetime earnings, there’s no point in trying to take advantage of it, because you can’t reliably predict at the time you apply to law school what the economy is going to be like when you’re done.)

Again, I take issue with these conclusions in some respects regarding (among other things) their breadth and predictive value for reasons I hope to explain in coming posts.  But now you have the big picture.

Stay tuned. 

--Bernie

What Happened To the Class of 2010?

Deborah Jones Merritt has just posted a new piece on SSRN (as well as a related blog post) that’s well worth looking at for anyone interested in the state of the legal job marketplace – and the implications for law schools.

Taking advantage of the wealth of information now publicly available on the internet, Merritt conducted a down and dirty longitudinal study of those admitted to the Ohio bar in 2010, when the full impact of the recession had hit legal hiring.

She finds that job outcomes nearly five years out are poor.  She compares the 2010 Ohio figures with the 2000 national figures from the After The JD study, and finds that those who started out in Ohio in the midst of a recession in 2010 were in worse shape four and a half years out than the national cohort of those who started out in the 2000 recession.

From that, combined with a look at the changing structure of the legal marketplace, she draws a bigger – and undoubtedly more controversial – conclusion, which is that the contrast most likely is explained by the changing structure of the legal services marketplace, where US lawyer jobs are being replaced by everything from outsourcing to software. Put differently, she concludes that her Ohio figures provide data to support the claim that structural change is depressing job prospects for young lawyers.

Last but perhaps not least, she digs in to what this implies for law schools.

Do Employers Actually Look at U.S. News Rankings?

In honor of the impending US News Rankings release (and in the alternative to discussing them, which I don't plan to do), I wanted to pose a question. I think I know the answer, but I could be wrong: Do employers actually look at the US News rankings in making hiring decisions? I ask because I've seen this written on blogs and in comments - that the rankings are how employers see you. This post at Above the Law suggesting that employers not do so (and thus assuming that they otherwise would) is an example. This doesn't mean students don't look at the rankings or even that they shouldn't. It merely questions this factual predicate about hiring.

My gut says most employers don't for a several reasons reasons.

Maimonides had it Right: Law Schools Must Teach Students to Fish

According to a 2012 report from the ABA, approximately 70% of lawyers in the U.S. in private practice are in solo or small firm settings (including one lawyer to 10 in a firm).  While we know the number of jobs in large firms, government and corporate law office settings has decreased, we also know that we have a serious access to justice gap.  It is not that we have too many lawyers it is that we are not thinking about how to educate law students in a manner that will enable them from a value proposition and training standpoint to be community-based solo and small firm lawyers if they so desire.  Very few would disagree that upon graduation from law school and licensure following shortly thereafter, that the vast majority of new lawyers are not best prepared to hang out their own shingle and practice law. This may be an economic necessity for some, and yet well-planned and supported, it could present an opportunity for community-based legal services that could assist in helping to shrink the justice gap. There have been many creative programs designed to address post-JD employment challenges such as Lawyers for America  founded by UC Hastings School of Law and Legal Corps at Miami School of Law, and programs designed in this vein to also help underserved populations such as those who reside in rural areas.  

There is an oft quoted phrase from Maimonides, “Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime.”  So, how should law schools respond and teach students to fish in the new normal? One of the most intriguing movements to accomplish this while instilling an access to justice ethic is the law school-based incubator program.  Through this effort, about three dozen law schools are providing curricular and/or shared office space arrangements for graduates to learn how to start, manage and build a law practice.  The second annual conference on Enhancing Social Justice Through the Development of Incubator and Residency Programs is scheduled for later this month at Cal Western Law School. The first conference was hosted at Touro Law Center.  The ABA is tracking the latest news on law school incubators. There are many related developments addressing infusion of more business related courses in law school and blogs and virtual mentoring and advice for those starting their own practice.  The business of law practice, well beyond the traditional law office economics course, is quickly becoming an important part of the law school curriculum.  As the law-school based/supported incubators begin to sprout new law firms (and, by the way, some of the incubators are supported by bar associations such as the Chicago Bar), it will be important to conduct a longitudinal study that benchmarks and assesses both new lawyer preparedness to be successful in this space and the impact of such efforts on access to justice.