By now, everyone in the industry has heard of “The Death of Big Law”, by Larry E. Ribstein. Ribstein is the MIldred Van Voorhis Jones Chair, Associate Dean for Research, University of Illinois College of Law. The paper achieved renown not only because, at first blush, it appeared to sound the death knell for the large law firm as we know it, but because his protocol for wiping the slate clean and starting anew struck a chord with many. Indeed, Ribstein’s outlook, although he claimed it was pessimistic, was more practical than dismal, more bent on reformation than on being rambunctious.
“The real problem with Big Law is non-viability of its particular mode of delivering legal services,” Ribstein says in the article, which is available on the Social Science Research Network. In previous papers, he had mentioned how law firms are set up in such a manner that its members are more heavily invested in furthering the reputation of the firm than of tending to its business books…that a firm should be run more like a profitable company. (In essence, he believes that Big Law firms currently charge clients for the value of their firm’s reputation.) The author also opines that professional ethics rules–limited liability, non-lawyer ownership and non-competition agreements—impede a firm’s growth.
What exactly did Ribstein’s analysis predict and, importantly, how will a successful Big Law firm of the future look under the lens of Ribstein’s learned scrutiny? In a nutshell, he wants to wipe the slate clean and start all over.
“The large law firm’s business model…requires fundamental restructuring,” he says. Ribstein proposes new models which purport to replace Big Law; new models which might push through regulatory barriers.
At one point, he theorizes that even these steps might not be enough. One reason: other forums might vie with lawyers. “In the future,” he says, “the sale of legal expertise may move beyond client advice [solely] by law firms to include completely different types of businesses.”
Ribstein (pictured here) explains that owning firm-specific property will be a big help in attracting financing. This will be necessary as clients become more informed and as global competition in the legal services market intensifies. (In other words, as times get even tougher.)
In addition to owning intellectual and other property, firms will have to concentrate on selling products, rather than on providing personalized advice. An interesting point that Ribstein brings up has to do with the legal version of what in Corporate America is referred to as the “corporate veil”. Here, Ribstein concludes that there is an “asymmetry” of information in a lawyer-client relationship and that the value of a large law firm is derived from somehow letting the client in on the mysterious ins-and-outs of law as the client understands it to pertain to his or her needs.
“It is hard for clients to shop for the most skilled or trustworthy lawyers because, as non-experts, they may not be able to accurately judge” even long after the services are rendered. This results on a reliance on credence and stresses the importance of individual lawyers’ reputations (as well as the firm’s reputation). “Law firms can help clients by monitoring and screening potentially untrustworthy clients,” the professor says. Clients will pay extra for a large firm since they know that what Ribstein calls “a cheating firm” pays with its reputation, as well as with lowered fees.
Although he sees a reason to inject a bit of business into firms’ apparatus, Ribstein is the first to admit that the hierarchal formula won’t work here, as non-experts simply can’t oversee professionals. Neither will high fees for routine matters. He cautions that consumers should never be forced to hire “only those with costly, broad-based…training” when the advice is completely predictable.
With these and other challenges at stake, Ribstein concludes that addressing incentive issues like the need to encourage members to build the firm’s assets, versus just building their own clientele, is a great place to start the restructuring process. For more on these fascinating and complex opinions, go to: http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=47251