Ode to the Class of 2014

I’m again teaching at the University of Ottawa Law School during its unique January term in which students take one course for three hours per day. We discuss how the practice of law is irreversably transforming and how they’re going into the worse articling market in history with a pilot LPP program that is being set up for failure by Benchers who delayed the LPP decision far too long.

Layer on top of that, technology that reduces the number of lawyers needed for certain tasks, the conflict between hours targets and the “do more for less” challenge, alternative legal providers, the growth of contract lawyers, permanent associates, partners who aren’t permanent, the growth of paralegals, as well as a clear message from partners at most law firms that there is no more room at the top.

And judging from some of the shocked looks, some in my class may have wished they had taken something else!

So it’s little wonder that I always hear Billy Joel in my head before each class:

Well we’re waiting here in Allentown
For the Pennsylvania we never found
For the promises our teachers gave
If we worked hard
If we behaved…….

So the graduations hang on the wall
But they never really helped us at all
No they never taught us what was real….

And we’re waiting here in Allentown.
But they’ve taken all the coal from the ground
And the union people crawled away….

Every child had a pretty good shot
To get at least as far as their old man got.
but something happened on the way to that place……

Do students have a right to feel that they’ve been sold a bill of goods by a generation of lawyers who’ve ridden the golden age of lawyering and now simply look at the new crop of graduates and exhort them to “work hard” and be a “damn good lawyer” and everything will magically work out?

Yup.

On the other hand, as President Obama’s team was fond of saying in 2009, “never waste a good crisis.”

For those students graduating this year, next year and in the coming years – you have the opportunity to fix the profession, in terms of how it’s structured and operates, in terms of what the real purpose of law is, and by extension what the purpose of lawyers truly is.

You have the opportunity to repair the tarnished image of lawyers, not through schlocky advertisements, but by taking stock of your environment, using new tools, methods and processes and re-envisioning what lawyers can be to their communities.

As hard as these times are, and will be, on all of you – please, don’t waste this crisis.

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  1. I have been a small-firm solicitor for 30 years, and a bencher for 18.

    There are four points at which an optimum number of lawyers per capita can be determined in the best interests of the public. Three of them work in descending order of effectiveness. The last doesn’t work at all.

    The first is when governments use experience, actuarial analyses, and good judgment to determine a sensible number of lawyers per capita (to maintain both excellent services and a highly competitive marketplace) and set law school intake rates accordingly, realizing that pouring money into law schools to spew out students who cannot find jobs or enough clients to sustain themselves is not a good use of taxpayers’ money when other education programs such as skilled trades and medical schools are starving for adequate sizing and funding. But the first doesn’t happen.

    The second is when the universities with law schools determine that it is irresponsible to spew out hordes of students who cannot find jobs and foolish to lower entrance standards to admit students from the bottom half of the undergrad classes. But that doesn’t happen either. It is now possible to graduate with a BA with B average, skip the LSAT, and go to law school overseas, then return to Ontario and be guaranteed a call to the bar via the LPP. By the way, 38% of undergraduate marks are now in the A+, A, and A- range, meaning that a B average is a below average mark. The practice of law will increasingly becoming the dumping ground for below-average undergrads.

    The third is when the Law Society uses, in the best interests of the public, a needs and market driven process to calibrate an optimum balance of lawyers per capita. That has never happened because it is felt that bar admission is too late in the process to do the calibration humanely.

    The fourth is at the post-call stage when squads of less well-trained new lawyers, unable to find jobs and saddled with debts that would make US Congresspeople chew their nails to the knuckles, open their own firms and resort to churning, roiling and boiling their mostly family and civil litigation files to make whatever money they can however they can from a small, sliced and diced number of clients per lawyer – ethics, wisdom, logic, and good sense be damned. Simple arithmetic shows that when you double the number of barristers per capita, you cut in half the number of clients per barrister. Each client has to pay twice as much if the barrister is going to maintain the same standard of living as before. And by the way, while some lawyers make a lot of money, the vast majority live at a level that will not allow them to retire in the same comfort as a high school teacher or nowhere near as early either. The average age of retirement for lawyers in private practice is 75.

    When these hordes of underemployed lawyers fail years into their careers leaving behind the detritus of mishandled files or, worse, become successes by making a mess of the system, the post-call market force advocates say, “See? It all works. And if it doesn’t, we’ll fix it with even more lawyers and more classroom time priced to add to the debt.”

    The Ontario law schools have bloated up in size (Ottawa U more than doubled in size due to its response to its own computer error). The law schools have been for years graduating law students at a rate that is five times greater than population growth. The market cannot absorb them. That is the main reason why there are not enough articling jobs to go around, and not enough post-call jobs either.

    The Law Society’s answer was to create the LPP. By doing so, the benchers let the government off the hook for its negligent myopia and misallocation of scarce education resources, the universities with law schools off the hook for their pious, irresponsible, self-serving cash grabbing, and themselves off the hook for any heat they might have taken for denying any student’s dreams, schemes and moonbeams of being called to the bar, even those who arrived on our doorstep by circumventing Ontario law school entrance requirements (themselves tainted by mark creep).

    Instead, the benchers have created a system that will dump hordes of new lawyers onto the public in the post-call period despite, thanks to the American Petri dish next door, the clear evidence that having far too many lawyers per capita produces an increasingly costly and dysfunctional legal system. The benchers also decided to tax their members to help pay for it.

    Solicitors have remained very affordable. The public has little trouble affording the services that small firm solicitors deliver. Virtually all the access to justice issues are found on the barrister side of the profession.

    The ever-increasing cost of barrister services keeps rising even as the number of barristers per capita explodes. That is the opposite of classic economics which demonstrates that, in most sectors of the economy, an increase in supply reduces the cost of demand, but it is a perfect illustration of those exceptional areas of an economy where an increase in supply increases the cost of demand.

    In 1995, there were about 22,000 lawyer members of the LSUC; now there are about 44,000 – a huge increase relative to population growth, and getting worse by the day. Despite the more than doubling of the number of barristers per capita in the past 18 years, fewer and fewer members of the public can afford them.

    Some people point to the increased number of self-represented litigants as a reason for hugely increasing the number of lawyers. They fail to realize that the number of self-represented litigants exploded during the same period when the number of lawyers exploded by 40% (far more than population growth). They don’t want to realize that the two phenomena are related simply because it is hard to prove that they are. But they absolutely are.

    The next mistake that I fear the Law Society will make is the adoption of Alternative Business Structures (ABS) which will allow venture capitalists and companies like Wal-Mart (seriously) to own up to 49% of a law firm. The winners will be the current partners of the big law firms who stand to make a killing, but everybody else will be the losers. ABS is the shiny new toy, but it is a Trojan Horse. Pure poison. It is absolutely certain that ABS will lead to a huge concentration of ownership with the inevitable loss of competitiveness. The legal profession will also see a loss of independence. To the extent you give up ownership, you give up independence. That is certain. Money is too powerful. And it can only worsen over time. And once you let the ABS genie out of the bottle, it can never be put back again.

    For an example of what happens when you let non-law corporations take over or dominate an area of law look no farther than the irredeemably evil American title insurance industry – an industry accurately described by the Government of California as “a dysfunctional industry in which the public pays too much” and by the Supreme Court of Iowa as “an invidious form of business”. While home, car and life insurance industries pay out about 90% of premiums in claims, the US title insurers pay out about 4.5%. Not 45%. 4.5%. The American title insurers were allowed to “compete” with lawyers, whereupon they undercut the real estate bar into near extinction and almost wiped the market clean of competitors. In the US, instead of thousands and thousands of law firms doing the conveyancing in fierce competition with one another, just four title insurance companies dominate 87% of the conveyancing market and they charge considerably more than the lawyers ever did while delivering a lousy product and while refusing to pay claims. That is ABS in action.

    In Australia, the firm that pioneered the greedy grab for existing partner income that characterises ABS, Gordon and Slater, has already garnered 25% of the personal injury market. ABS is still in its infancy. It will not be long before other large firms in Australia take steps so as not to lose even more market share. They will band together and in a few years, a small number of giant firms will dominate 90% of the market. That will not be good for competition or the public.

    Think back 15 or 20 years. It went by fast, didn’t it? The harm of making decisions like allowing ABS may not manifest for 15 or 20 years, but it will manifest, and when we get there, it will seem as if the harm happened quickly.

  2. Mr Wright, while you’ve provided a number of critiques and concerns there is no mention of the bar exam which supposedly determines who practises and who doesn’t. Is the bar exam not doing what it should, i.e., is the exam not designed to determine the competency to practise? Or, is the bar exam a contributing factor to the challenges of the legal services industry?

  3. Dear Ms Milner,

    The ABS possibilities that I am so concerned about are, first, ones that, experience already shows, replace highly competitive excellent services with anti-competitive lousy services. They get adopted because they appear beneficial, but they are not, but once the harm manifests, it is too late to do anything meaningful about it. On this particular issue, I have been talking myself blue in the face for years without seeming to get very far; yet, the evidence is all there.

    The second is any regime that would erode the independence of the bar. The British spent hundreds of years evolving and entrenching the notion of the independence of the bar only to adopt a process that, over time, can only harm it. It will be too difficult, especially over time, for a law firm to resist the subtle changes in law firm culture needed to satisfy the monetary and other imperatives of non-lawyer owners. Those imperatives already have a significant impact on legal practice; we should not be increasing the pressures.

    An ABS scheme that would bring these twin harms into existence, whether sooner or, more likely, later, would be a tragedy for which the birth parents would no longer be around to be held accountable.

    There remains lots to talk about how improved access to justice and legal services can be achieved without giving up ownership or bringing about an anti-competitive concentration of delivery (and this is where I pray the benchers will go).

    One obvious and sensible means is greater use of paralegals in areas that have been abandoned by lawyers. If lawyers cannot meet certain legal needs cost-effectively, then other providers should be allowed to. The classic example is traffic tickets. Once it was no longer feasible for lawyers to deal with traffic tickets, paralegal firms arose to provide assistance to the public that they would not otherwise have gotten. Another example is small claims court where lawyers can, but rarely, appear.

    Another is helping law firms acquire software that would allow them to interact more efficiently with themselves, the legal system and their clients. A good example of this on the legal system side is Teraview. It was created and provided to lawyers and others (e.g., realtors) without requiring the lawyers to sell ownership of their firms. Another example is conveyancing software. Such innovations have allowed many real estate lawyers to keep their fees at close to what they were 20 years ago. What was lost to inflation was balanced by efficiency and that has helped the public. Real estate lawyers remain, by far, the lowest cost deliverers of major services in the real estate world – lower than government, realtors, mortgage brokers, and surveyors. Title insurance premiums don’t count because, given that American-style title insurance returns so very little to the public, any premiums are automatically heavily over-priced. While some premiums have actually come down recently in Ontario, experience shows that the historical trend of premiums is upward and the payment of claims downward.

    All of these beneficial innovations were done without having to sell ownership of law firms. We ought to be able to keep doing it without putting elements of our independence at risk. We can even make it clear to businesses that if they build it, we will come, but also make it clear that we are not going to give them part ownership of the legal profession.

    Another, but I see this as both hugely beneficial and unlikely, is a drastic overhaul of the litigation system to delete, except for exceptional cases, mediations, pre-trials and much of discoveries, and to impose time limits within which the opposing lawyers must figure out the fairest settlement or explain to a judge why they haven’t. (Such explanatory appearances would be most beneficial if scheduled one hour after the judge was supposed to leave on holiday.)

    Litigation is where most of the access to justice problems reside. Litigation costs a fortune because it takes too long, and involves too many steps separated by too much time, necessitating repeated preparations which take time which costs money. And because the lawyer is on the record for a demanding number of cases, he or she is compelled to spend months and years on them. As a result, the lawyer cannot take on more files and that leads to the problem of unmet needs.

    If lawyers could wrap up their files in less time (meaning lower fees but greater affordability for the clients), then they could take on more files and replace the money lost due to the shortened process. That can be done without giving up ownership and without yielding to the forces of anti-competitive corporate concentration. What will not work, and cannot work, is trying to accomplish the same goal of efficiency by quintupling the number of lawyers per capita because then there is not enough work to go around and the bar cannot sustain itself at fair levels of income without being extremely inefficient.

    I fear that litigation is doomed to be increasingly delivered by people who need the cases to last awhile to make a sensible living (not a rich living, just one that will allow a retirement somewhere below that of high school teacher even while waiting to 75 or 80). The temptation (or economic imperative) to drag out files cuts at the heart of our legal ethos, but this seems to be happening more and more. I won’t bore you with the details, but I am familiar with a case in Ottawa that dragged on and caused a great deal of damage to a family for no sensible legal reason. There being no such reason, one was left with considering the lawyer’s need to earn some billings as the reason. After a change of lawyer, it settled for what had been recommended, vastly more cheaply, 18 months earlier.

    One of the most important jobs of a barrister is to analyse the case, and this can often be done at relatively early stages, and then settle with the other barrister who will have done a similar analysis. This actually happens quite a lot (to the great credit of the barrister bar), but our litigation process militates against it especially in any environment where there are too few clients to go around.

    Anyway, I digress (you can see why you should not sit next to me on the train). To answer your question, it has long been thought, with a fair degree of justification, that the bar examination stage is too late in the process to do any real culling. The students have by then gone through years of post-secondary education, incurring great loss of income and gain of debt. The fairest time to cull them is in first-year law school. For decades, that is exactly what the law schools did. Then, in about the early 90s, the central admin offices of universities with law schools in effect told their law schools to, ahem, reconsider failing anyone (I have this on excellent authority). This was done so as not to lose the grants and tuition. As a result, once you are in law school (including the ones overseas who take students with below average marks and no LSATS), it is next to impossible not to graduate. And virtually no-one has their career derailed at the very late bar exam stage.

    The legal profession was doing an excellent job of absorbing the graduates sensibly coming out of law school. Then the profession got hit with graduates at a rate about five times higher than population growth. Despite the huge increase in graduates (and therefore calls to the bar), there has been, during the same time span, a huge increase in the number of self-represented litigants. I maintain that they are related phenomena. The reasons are subtle, but no less real.

    The counter-argument is that we need far more lawyers. If you will pardon a bit of facetiousness, if the trend of five times population growth continues, in the future, every lawyer will have one client each and the lawyer’s income will depend on the income of the client, of which the lawyer will take half. I intend to become friendly with the next David Thomson.

    It is argued by some that any culling is wrong as it is protectionism, and that there should be no restrictions. The logical conclusion of that is that literally any person who wants to become a lawyer should be allowed to become one. On that theory, any person who wants to become a doctor should be allowed to become one. The proponents of this theory say that the market will determine who carries on in the practice of law (or medicine). Excuse me, but I do not want to find out that the surgeon who operated on me got into medical school despite poor marks, graduated because he kept paying the tuition, and later fell out of the practice of medicine after gaining a reputation for shoddy work, part of which was on me. The delivery of that news by market forces comes a little too late in the day. Bad doctors already exist (though I hope and pray still small in number). Why would we want a system that hugely increases the odds of that happening more frequently? Medicine is more important than law, but law is second. (I want to live more than I want to be free, but if I am healthy or at least healthy enough, then I want to be free, and it is the law that frees people from governmental tyranny and contractual uncertainty.)

    Those who say that there should be restrictions are then accused of being elitist. I disagree. We all have different skills and talents. Sheet metal workers can easily make over one hundred thousand a year, and they can start soon after high school, earning income right away and avoiding debts. Even for lawyers who have above-average practices, a large number of their business and trade clients will retire sooner and more comfortably than the lawyers. There is absolutely nothing wrong with that. Most lawyers are not envious and would not trade places. We like words too much. But I do not think that society should be structured in such a way as to produce a painful shortage of doctors, nurses and sheet metal workers and a harmful surfeit of lawyers.

    Even the people who attack the notion of restrictions, in fact agree that some restrictions should apply. That means the argument is really about where to draw the line. I do not say that we should go the Chinese route (one lawyer for every 50,000 people), but I also say that we should not go the American route (one lawyer for every 289 people). If a great surfeit of lawyers truly was in the public interest, then the US would have the lowest cost legal services in the world because they have the highest number of lawyers per capita in history. Instead, they have the highest cost legal services in the world and probably in history.

    Where should the line be drawn and how should we do it? The Law Society is seen as positioned too late in the process to be effective at deciding this, but if the Law Society continually lets off the hook the government and the law schools, then there will never be any serious attempts to deal with the issues.

    On that, the end.

  4. Dear Mr. Wright,
    Thank you for taking the time to provide a thoughtful and eloquent response which I’ve very much enjoyed reading from beginning to the end. Obviously, reform (or overhaul) of the process and system is needed but time will tell what form or structure of reform will prevail. For better or worse, these are interesting times.

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