June 18, 2007

"Harnessing irrational law firm egotism" for the public good.

David Lat has an op-ed in today's NYT, about the giant bonuses law firms are giving to Supreme Court clerks: $250,000, on top of a salary of nearly $200,000.
In recent years, the practice of law at the nation’s largest firms has become much more of a business and much less of a profession. Firms have been squeezing more billable hours out of their associates, abandoning less lucrative practice areas and showing the door to partners who don’t bring in enough business — measures that would have been unheard of in the profession’s more genteel days.

So this bizarre competition among prestige-hungry law firms to collect the most young legal rock stars actually represents a healthy check, however modest, on this profit-maximizing behavior. By harnessing irrational law firm egotism to serve the rest of the profession, enormous clerkship bonuses achieve an impressive, increasingly difficult feat: getting top law firms to contribute to something other than their own bottom line.
You can make up all kinds of theories about why some ridiculous behavior is actually for the good. I'll have to think about this one some more. It may seem hard to care if law firms compete with each other self-destructively, but try.

38 comments:

Sloanasaurus said...

As an in-house Attorney who pays a lot of fees to big law firms, I can say that there are many big firms who constantly try to bill the crap out of you after offering nothing in terms of inellectual capacity.... Translation, they give your work to new associates who know nothing but how to put in tons of hours. You have to weave your way through these firms to find the few attorneys who have an original thought. If this is the case, there is a wide open opportunity for the rise of smaller firms, who can give more quality at a much lower cost.

The Drill SGT said...

Sloanasaurus said...
As an in-house Attorney who pays a lot of fees to big law firms,


Do they say these lawyers work for "out-house" firms? :)

Tim said...

While I'm sure there are happy attorneys somewhere, I cannot say I know many, as most of the attorneys I know don't actually practice law anymore. I'm sure this "trend" (yeah, as if law firms only became rapacious, profiteering businesses in the last few years - it must be George Bush's fault...) is a contributing factor.

B said...

Drill Sgt. asked....
Do they say these lawyers work for "out-house" firms?

which followed sloanasaurus....
there are many big firms who constantly try to bill the crap out of you


....leaving a headline of:

"Out-House Lawyers Bill Crap Out of You"

Next?

The Drill SGT said...

Or

"All you get is Crap, when you go to the Out-House"

Badger 6 said...

Leaving the practice of law to come to Iraq may have been the best careers decision I ever made.

Mr.Murder said...

Private dollars buying influence on the highest court- sounds like a great idea.

Joe said...

David Lat is just jealous.

Jim said...

Why don't the big firms get together like the major professional sports leagues and institute a "draft" of the top upcoming legal talent? That way they can put a cap on salaries just like the National Football League, for example. This model would require the establishment of a union of young lawyers and some sort of collective bargaining agreement, but if it works for professional sports, then maybe it should be considered for the legal profession.

Maxine Weiss said...

David Lat isn't White. Is he Philipino?, Pacific Islander? He's definitely NON-Caucasian.

I'm just making an observation.

dmfoiemjsof said...

I don't get Lat's argument. Bonuses for Supreme Court clerks is perfectly rational and profit-maximizing. These are the same firms with $1-2M in revenue per partner. This is chump change, and well worth it not only for the bragging rights and political connections, but for building a Supreme Court practice.

Maxine Weiss said...

Is this a trend? If Althouse starts quoting from a variety of NON-Caucasians, what kind of statement will she be making?

Of course if she references only Whites, we all know what that means.

I know I'm keeping score.

Peace, Maxine

The partisan moderate said...

I would have more respect for the argument that law clerks or lawyers in general are overpaid if law schools didn't charge so much. The estimated cost of my law school is $64,000 a year (which like most estimates underestimates living expenses). So $200,000 of debt and the opportunity cost of making at least a nice five figure salary, sort of makes up for being "overpaid".

When will Ann take issue at what her law school and other law schools are charging students? Law Schools are terribly mismanaged and students are forced to subsidize the professor's scholarship (even esoteric stuff that is not particularly helpful to the practice of law) as well as subsidize their fellow students practicing so-called public interest law, which in affect in cases subsidizes left-of-center advocacy.

When Ann is willing to take issue with this, than maybe we can focus on law firm salaries and bonuses.

Sloanasaurus said...

When will Ann take issue at what her law school and other law schools are charging students?

What... the only reason law schools charge so much is because people like you are willing to pay.

It cost me $5000 per year at the UW in the early 1990s. I thought that was a lot....

Badger 6 said...

On a more salient note though, Lat's thesis is extraordinarily weak.

Law firms end up in effect subsidizing less wealthy precincts of the profession.

For how many people? Eighteen per year? It just does not stand the scrutiny of anything more than a surface scan. They are paying for perceived access, even if they cannot practice before the Court they can surely call their old mentor and of course they can render advice to others that maybe about to go before the court.

One of the things we lawyers do is make up these transparent rules that fool nobody and then call it "ethical."

There is not an altruistic bone in the body of the hiring and compensation committee that chooses to give those bonuses. There is a quid pro quo. These firms believe those associates are worth that sort of cash because it is going to remunerate the firm. To think the firms want you to pay off your debt quickly so you can go onto academia is the height of sophistry or naivety. I just don't know which one.

Of course I only went to a third tier law school. What do I know?

Joe said...

The law of supply and demand dictates that one of these "big" law firms is going to realize that they can undercut all their competitors and offer high quality, low cost service.

Oops, sorry, I thought this was a short fiction writing contest.

Ruth Anne Adams said...

Badger 6: Thanks for your service. Can you comment on the surge? How does it look from your vantage point? If you can't comment, no prob. Please be safe.

hdhouse said...

well i've learned 2 things. 1. sloan says he is an attorney. that answers a lot of questions. 2. it there is that much $ in the piggybank for hiring bonuses the firms are overcharging out the wazoo.

last, how about a disclaimer...something that says "if you retain this firm, please be advised that we routinely piss away a quarter million to get some hotshot clerk...we are gonna work his butt off and charge you double for his brain, then when get gets to be merely adequate in real world experience he will leave and we will spend some more so we can bill the shit our of our clients...use his service or not".

oh life is so clear.

hdhouse said...

geeze maxine...what is your problem with this? you can keep score if you want. frankly i don't see your point. but then again, you don't either.

Meade said...

Why irrational egotism?
"Irrational egotism" is a redundant term.

Mr. Lat could have written "...harnessing ethical law firm egoism to serve the rest of the profession..." or "...harnessing rational law firm egoism to serve the rest of the profession..."

Or, he could have simply pointed to the ridiculous paradox of harnessed law firm egotism in service to others.

Civilization's winning strategy has always been a balance of healthy self-interest (egoism) with selfless regard for the interests of others (altruism).

Although egotism - the exaggerated belief in one's own importance and regard of oneself with undue favor - can have a sociopathic logic to it, in a truly civilized society egotism can never be rational.

Too Cool for School said...

Biglaw sucks.

I dunno about egotism, but those salaries sure do foster greed and a sense of entitlement.

Joe said...

Does anyone ever really understand Maxine? I suspect that the point of Maxine's comments is to be so incoherent and irrelevant that people struggle to find meaning and relevance where there is none.

Ann Althouse said...

David actually answered Maxine's question on his blog (and corrected her spelling).

Bruce Hayden said...

I think that it is 27, not 18 per year. But also note that invariably these SC clerks clerked for a lower level, usually Circuit Court, judge the year before.

A couple of years ago, I saw a breakdown of what schools the SC clerks had attended. It was almost like there were quotas for Harvard, Yale, etc.

In any case, these clerks have to be compared to the associates that they are competing against directly, and they likely would have earned almost that much more than the SC clerks for those two years, so this can be seen as an incentive for that group to take clerkships.

Finally, it is about the advertising. The law firms involved likely figure that each attorney who has a SC clerkship in his bio is worth at least the $250k in advertising. Also, you may be able to argue that two years clerking are as productive as two years as a green associate in teaching the practice of law.

Of course, I am like Sloanasaurus in never figuring out why I should hire a firm like that in the first place, when I worked as in-house counsel.

Revenant said...

Why don't the big firms get together like the major professional sports leagues and institute a "draft" of the top upcoming legal talent?

Conspiring to fix salaries throughout an industry is against the law, so far as I know. Pro sports occupies a special legal position that allows for those sorts of shenanigans.

Maxine Weiss said...

Listen up everyone: These are the Summer Solstice longest days of the year, and you know I have nothing better to do than to count the syllables in each Althouse post.

I can glean a lot of insight into the true Althouse personality through the wordcount, syllable count, and race of the other Bloggers she references.

Would anyone like to suggest any better activities to fill the time, during these long days?

Love, Maxine

Maxine Weiss said...

Let's all pretend that I'm the only one on the planet who noticed race.

Let's all pretend that nobody ever knew that David Lat was of a different race.

Let's pretend that I'm the only one who's crawling the walls fiendishly looking to pick a fight to pass the time.

Because, nobody ever does that on here.

Let's all live in a dream world, where we pretend that we don't even notice what's staring us right in the face.

Love, Maxine

hdhouse said...

ohhhh maxine...how about you jumping in a sack with several wildcats and we toss you in the river...not that it would do the cats much good but a good clawing might really help your condition.

do you take nasty pills every morning or just when someone feeds them to you?

Seven Machos said...

My wife is a big-firm attorney. We met in law school. She has observed that many of the best attorneys come from lesser law schools. They were the very best in their classes and they work their tails off. She wonders why the firm doesn't hire more of these people, instead of mostly hiring a bunch of people every year from the Top 25 or so law schools.

The answer is that businesspeople who can afford to pay $200 to $700 an hour for legal work definitely look at the rosters of the firms where they send their business. They want very much to see those rosters full of grads from the best schools, not from places like the University of Akron. Having somebody at your firm who went to Harvard is worth it just for appearance, even if their cost if outrageous, and even if that person isn't a very good attorney.

Also, law isn't that tough. Most of what you do is pay attention to detail and slog through stuff. Nothing that I do as a lawyer is too complex for a person of average intelligence and education who wants to do it themselves. It's just hard, boring work, and sometimes technical work, which is why people pay lawyers to do it.

Jonathan said...

As a naive pre-law-student, I reject the implication [above] that there is no difference in quality of work from one lawyer to the next or that ability plays no role in legal outcomes. Am I wrong?

[incidentally, this is why 250k bonuses are neither ridiculous nor bad in my opinion]

Jonathan said...

Irrational egotism? In what sense is it not rational? Clearly this is market-driven, that is, self-interested. I don't know why you think the 250k is somehow not worth it or hurting the firm...

Badger 6 said...

Jonathon -

Seven Machos point is not that one lawyer is not better than another, quite the contrary. His point is that people overrate the piece of paper that hangs above the desk.

I would suggest, without proving, that the person who graduates at the top of their class from Akron or Southern Illinois is a far more valuable asset to a firm in terms or actual quality of work produced than someone in the bottom of their class from a "top 10 law school." Nonetheless the person with the pedigreeded degree will receive wider consideration for employment regardless of their skills.

Sixty percent of the score on law school rankings comes from how widely known the which school is. My Law School, Southern Illinois, receives high marks because of its extensive library which is open to students 24/7/365. It also receives high marks for class size.

It is also a relatively new school, about 30 years old, so it is still building its reputation.

Your second point is correct, the firms perceive these signing bonuses make economic sense. That is not what Lat says though.

hdhouse said...

7 nachos point is insipid. when i hire an attorney i hire him by reputation/referral from others. i've done the big time DC KLM streeters and I got nice opinions that probably worked well at the appelate level but in the down and dirty of ny supreme court where the judge just decides and knows that the backlog on appeal is so great that he really doesn't give a shit, well you can stick your harvard degrees you know where. they mean zero compared to someone who can get things done.

Maxine Weiss said...

I'm not nasty.

Here's nasty:

Maybe the money would be better spent on grooming and hygiene amongst the legal secretaries. Some of the tackiest Trash I've ever seen masquerading as "Legal Secretaries" with their chipped nails, unwaxed bare legs, split ends....these Skanks currently roaming the corridors of big law firms.

How is a fledgling young attorney supposed to summon any enthusiasm for the work with a Secretary that looks like that?

Get these women some nylons, makeup and a curling iron....quick. That'll go a long way to solving what ails big firms these days.

Love, Maxine

John said...

The scandal is that there is such a thing as a Supreme Court law clerk. Why aren't people appalled by the influence these people have? Essentially, politically connected young lawyers who have never practiced law in their lives who are subject to no appointment or confirmation or anything beyond an informal hiring process are allowed to have more influence over the state of the law in this country than most life time tenured federal judges. It is a disgrace. Supreme Court justices have too important a job to have clerks. If they are too old to do the work themselves, they need to step down and let someone else have a shot. No one who has not been appointed by the President and confirmed by the Senate should be writing Supreme Court opinions. Yet, in our current system clerks in some cases do just that. It is appalling.

Seven Machos said...

You and I are making the same point, hd. Not that you could ever admit to agreeing with me about anything, ever.

Badger 6 said...

Under John's analysis it seems then that no elected or appointed official should have any assistance, which seems on its face to be patently absurd.

Rather than go through the process every year though it would seem that they would be better off hiring staff attorneys that are General Schedule employees who make this a career rather than a stepping stone to the big bucks at megafirm.

Seven Machos said...

I agree with Badger 6. I don't think anybody on the Supreme Court is going to sign or sign on to an opinion without reading it pretty well first.

Incidentally, I still do the same thing in law. A partner asks me to write a document about X, Y, and Z, and that's what I do. People do this for CEOs in business, too. Entire presidential staffs do this. It's the way of the world.