non-lawyer law firm ownership

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HarlandBassett
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non-lawyer law firm ownership

Postby HarlandBassett » Sun Feb 19, 2012 2:05 am

why is the IBM GC concerned about it, especially since he doesn't work at a law firm?

http://blogs.wsj.com/law/2012/02/14/ibm ... onstarter/

In December, we reported the news that the American Bar Association is considering a proposal that would allow nonlawyers to own a stake in law firms, with certain restrictions. More precisely, the ABA has issued a paper for comment that could lead to a proposal, which would then have to pass muster with the ABA’s House of Delegates.

Anyway, at the time we spoke with WilmerHale partner Jamie Gorelick, who co-chairs the ABA ethics committee that is spearheading the review. She said she hadn’t “heard a big outcry on this one way or another.” But as the ABA gets deeper in the issue, and as state bars start studying it for themselves, a big outcry seems inevitable.

I.B.M. General Counsel Robert Weber, for one, is emerging as a loud voice in opposition.

Weber, who spoke with Law Blog Tuesday, said the idea is gaining purchase for the wrong reasons: Firms are looking for interest-free capital in tough economic times.

“I don’t know if I’d call it greed, but it’s in the greed ball park,” he said. “When the world was such that lawyers were able to raise their rates 5%, 6%, 10% a year…and profits per partner at big firms and small were outpacing the GDP, you didn’t hear about this.”

He said the profession has grown more selfish in recent years and less focused on clients, which, in turn, has given the idea of outside ownership room to grow.

“Now it’s not ‘I’m doing something good for society and my clients’ — it’s ‘How far can I push things to maximize my personal potential,’” he said. “All you need to do is open the paper and read about groups of partners jumping from one firm to another. The notion of partnership has degraded at these mega law firms.”

The purpose of the rules of professional conduct for lawyers is to protect the integrity of the attorney-client relationship and guide decision-making based on the client’s best interest, Weber said.

“Lawyers have a separate set of rules that are used as a defense of the profession policing itself. Once we get to the point that we start behaving like any other business, then I would take the position that we are forfeiting our right to self-regulation,” Weber said.

The ABA proposal imposes limitations on outside ownership to guard against conflicts. Nonlawyers could own stakes in law firms, but lawyers would still have to maintain a controlling financial interest and voting rights in the firm, and nonlawyers couldn’t have their own clients or offer nonlegal services to clients.

Weber said that was no assurance.

“We’ve got a real incrementalism problem right now,” Weber said. “I can tell you the way of the world is that incrementally those protections will begin to go away and nonlawyers will have more and more say, and this profession will have given up not only our independence but our rightful differentiation from a business.”

He went on, “The only way you could say that’s not going to happen is to ignore human history, to ignore the example of the investment banks and to say lawyers really are different, better people by nature than others. As much as I love lawyers, that isn’t the case.”

Lawyers should draw wisdom from the example of the investment banks, he said. When they shifted from partnerships to corporations, they increased their access to capital, but they also stopped managing their risks as carefully, Weber said.

The plaintiffs firm Jacoby & Meyers has filed lawsuits claiming that state laws prohibiting nonlawyers from owning a stake in law firms unconstitutionally restrict interstate commerce. The firm has said it needs an infusion of capital to expand its operations into lower-income communities, and to represent their interests against well-funded corporate firms.

Weber said the firm could find capital elsewhere, without sacrificing ownership. “There is a wealth of extraordinarily capable” plaintiffs firms doing contingency work, he said. “They’re doing quite well, thank you, and they’re smart, and they analyze cases well, and they’ll take on anybody. And if they need money, they’ll get it from a bank because they want to maintain control over what they’re doing.”

Weber told Law Blog he has broached the issue with about 10 general counsel from large institutions. “I can’t say I’ve had one of them argue me on this,” he said.

Weber said he hasn’t started building a coalition against the proposal, but he promised he would if it starts to gain enough support.

“When I see something like this that I think is fundamentally at odds with what has made this profession special, and I see that it comes at a time of economic hardship, it gives me real concern,” he said.

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Re: non-lawyer law firm ownership

Postby MrAnon » Sun Feb 19, 2012 2:13 am

Smaller payday for him if he ever returns to one under this kind of management.

He loses negotiation power in his rates if private equity takes over his outside counsel.

I imagine this idea would up end big firms as we know them. Firms outside of the top 10 or 20 would not be able to justify lockstep pay for associates in the same way.

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Re: non-lawyer law firm ownership

Postby c3pO4 » Sun Feb 19, 2012 2:51 am

MrAnon wrote:Smaller payday for him if he ever returns to one under this kind of management.

He loses negotiation power in his rates if private equity takes over his outside counsel.

I imagine this idea would up end big firms as we know them. Firms outside of the top 10 or 20 would not be able to justify lockstep pay for associates in the same way.


It would lead to massive industry consolidation. Instead of 100-250 top firms, we'd have 5-10 megafirms. It would mirror the landscape in consulting firms, with Delloite, Accenture, Mercer, etc.

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HarlandBassett
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Re: non-lawyer law firm ownership

Postby HarlandBassett » Sun Feb 19, 2012 3:18 am

saw this in the comments section

Of course corporate GC opposses this because a publicly traded Plaintiff’s firm would have enough money to go to trial on any lawsuit. With outside ownership the risk to a Plaintiff’s firm of not taking a settlement is much less since the chance of refusing the settlement and consequently going bankrupt is less because the firm has much greater finiancial backing. It would actually put a Plaintiff’s firm and a corporation on more equal playing feild. It almost seems that the corporate GC has a fiducary duty to his client to oppose allowing outside ownership for this reason.

Additionally, outside ownership would be better for consumers because it would increase the police power of tort law on corporations for the same reason.

Moreover, outside ownership would put criminal defendants on more equal playing feild with the government. Who would bother with an over-worked assistant public defender when you could get an attorney at Wallmart to handle your DUI case for $200. Outside ownership will make lawyers cheaper for consumers and thereby increase access to attorneys for everyone. So it’s good on that front too.

Further, any time someone starts appealing to emotion by saying your special and the free market shouldn’t apply to this feild because we’re so special, I become very skeptical. He did not present any rational logical reason to oppose outside ownership. Rather, he made a direct appeal to irrational emotion.

I think that if outside ownership were allowed, especially in US markets, it could be transformative in a good way.


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HarlandBassett
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Re: non-lawyer law potato ownership

Postby HarlandBassett » Mon Apr 02, 2012 1:50 am

just saw this on WSJ

Law Firms Split Over Nonlawyer Investors
By JENNIFER SMITH

The legal profession's notion that law isn't a commercial enterprise may come as a surprise, since some lawyers now charge more than $1,000 an hour.

But some legal purists are aghast at a proposal that would reverse long-standing tradition by letting nonlawyers own limited stakes in U.S. law firms, something allowed on a broader scale in the U.K. and Australia.

Opponents worry that non-lawyer partners could push law firms to maximize profits at the expense of their obligations to clients.

"Let's keep remembering the story of Arthur Andersen and Enron—how great firms can lose their way by chasing monetary gain," said Lawrence J. Fox, a partner at the Philadelphia law firm of Drinker Biddle & Reath LLP who objects to the proposal. "I'd like us to mind our knitting."
PARTNER
PARTNER
Associated Press

British regulators have cleared Co-operative Group, which operates grocery stores, to provide legal advice.

Ethics rules bar most U.S. lawyers from sharing profits with non-lawyers. The theory is that outsiders not subject to the same rules of conduct could influence lawyers' judgments or otherwise erode the profession's ethical obligations of client loyalty and confidentiality.

Across the Atlantic, however, new British rules intended to expand consumers' access to legal services and spur competition are shaking things up. Changes phased in this year allow British lawyers to team up with insurers or other businesses, and even to solicit outside investments.

The changes followed similar ones in Australia, where Slater & Gordon, a personal-injury specialist, became the first law firm to float a public offering in 2007.

Given those developments, the American Bar Association is weighing whether to present its members with a less-sweeping option: allowing nonlawyers who work at law firms to own as much as 25% of a firm.

To some, the proposal would simply codify arrangements that are already common at many large law firms, where lawyers regularly work alongside nonlawyer professionals who help guide business decisions. Many of those professionals sit in on partnership meetings and are compensated by a bonus system that mimics profit-sharing, said Tony Williams, a London-based legal consultant and former managing partner of the global British firm Clifford Chance.

"I've been party to this sometimes rather sterile debate—are you a profession or a business?" said Mr. Williams. " I don't see a contradiction between the two."

Still, the question has some stateside lawyers up in arms. "I can't think of anything more pernicious or ill-considered," said David J. Carr, a partner at Ice Miller LLP in Indianapolis, who wrote one of the dozen or so comments urging the ABA to ditch the proposal. "You are diluting the essence of what it means to be a lawyer."

Such objections persist despite safeguards intended to guard against ethical lapses. Nonlawyer partners, for instance, would have to agree to abide by the same codes of conduct as lawyers and would have no control over a lawyer's professional judgment.

The ABA doesn't plan to bring the measure up for a vote by its policy-setting body, the House of Delegates, until next year, at the earliest, if it decides to put it forward at all. Its previous proposals to expand law-firm ownership have been squashed repeatedly. The ABA's rules of professional conduct aren't binding, but they serve as the model for most state bar associations.

One exception: the District of Columbia, where the local bar voted in the 1980s to let nonlawyers hold financial interests in law firms. It isn't clear how many Washington firms have taken that opportunity, but the now-defunct firm Howrey & Simon made its top financial official a partner back in 1990.

At the national level, opponents worry that opening the door a crack could lead to more profound shifts like those under way abroad. Last week, British regulators approved a license that will allow the Co-operative Group, a member-owned organization that runs grocery stores and also offers banking and insurance services, to provide legal advice on divorce and other family-law matters to its seven million members.

That's the kind of development that Thomas Gordon, legal and policy director for Consumers for a Responsive Legal System, would like to see in the U.S. "It's the people who can't pay $500 an hour but could pay a $500 flat fee for a divorce who would benefit," said Mr. Gordon, whose group wants to make legal services more accessible and affordable.

Nonlawyer ownership isn't exactly a burning issue for the larger firms that dominate the $100 billion global corporate legal market, according to interviews with a number of managing partners. Most can get the capital they need from their partners or banks.

In the U.K., most big corporate firms have yet to take advantage of their new options, partly because they threaten to create more problems than they solve, at least for now. For example, New York lawyers can't practice law in the state if they are part of a British firm with nonlawyer owners, according to a March 14 ethics opinion by the New York state bar association.

The idea of nonlawyer partners, or even outside investors, may have more appeal for smaller firms. Last year Jacoby & Meyers Law Offices LLC, a well-known personal-injury firm, filed federal lawsuits in New York, New Jersey and Connecticut challenging ethics rules that prohibit outside investment in law firms.

The 60-lawyer firm claimed the restrictions hurt its ability to raise capital to cover technology and expansion costs, and hampered efforts to provide affordable legal services to working-class clients. The New York suit was dismissed last month.

A lawyer representing the firm couldn't be reached for comment.

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Re: non-lawyer law firm ownership

Postby Lawl Shcool » Mon Apr 02, 2012 2:27 am

c3pO4 wrote:
MrAnon wrote:Smaller payday for him if he ever returns to one under this kind of management.

He loses negotiation power in his rates if private equity takes over his outside counsel.

I imagine this idea would up end big firms as we know them. Firms outside of the top 10 or 20 would not be able to justify lockstep pay for associates in the same way.


It would lead to massive industry consolidation. Instead of 100-250 top firms, we'd have 5-10 megafirms. It would mirror the landscape in consulting firms, with Delloite, Accenture, Mercer, etc.


Doubt it due to conflicts. Theres no reason these "mega firms" couldn't already exist but for conflicts of interest.

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Re: non-lawyer law firm ownership

Postby rayiner » Mon Apr 02, 2012 3:01 am

Further, any time someone starts appealing to emotion by saying your special and the free market shouldn’t apply to this feild because we’re so special, I become very skeptical. He did not present any rational logical reason to oppose outside ownership. Rather, he made a direct appeal to irrational emotion.


Any time someone makes an appeal to an Econ 101 vision of the "free market" I become very skeptical. We already saw what agency sorts of agency problems investment banks ran into when they became corporations. That nearly destroyed the financial system. Do we need to do that to the legal system as well?

I'd love a well-educated argument in favor of allowing non-lawyer ownership of law firms, but everything I've seen so far, including the Economist article, is college-level tripe.

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Re: non-lawyer law firm ownership

Postby Renzo » Mon Apr 02, 2012 11:05 am

It's a political/ ideological divide: if you like plaintiffs, you like outside investors in law firms. If you don't, you don't. This guy works for a big corporation, so he's more concerned about limiting "frivolous" lawsuits than he is about making sure the little guy gets his day in court.

It can cost millions upon millions of dollars to bring a complex class action suit. These are usually brought on contingency, and you might have a dozen or more lawyers, plus paralegals and office staff, all working for years before (and if) they ever see a dime from the suit. And that's before discovery costs, expert witness fees, and other litigation costs. Currently, all those expenses must be paid by the lawyers bringing the case. They can borrow the money if a bank will lend it, but it can't be secured by the judgment, so unless the lawyers are willing to put their own assets up for collateral, good luck.

This is a real barrier to bringing certain types of suits, and one tactic defendants can use to put settlement pressure on a plaintiff is to try and drag out the suit through discovery delays and motion practice, knowing that the plaintiffs' lawyers are probably in a real financial squeeze. Allowing outside investors would provide a ready source of funding, make these suits easier to bring.

If you are the type that thinks big corporations are trampling the rights of employees, discriminating against minorities, and cheating investors, then you'll see this as a big problem. If you are the type who thinks there is too much litigation, and that strike suits are too big a problem, you won't.

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Re: non-lawyer law firm ownership

Postby Renzo » Mon Apr 02, 2012 11:19 am

rayiner wrote:I'd love a well-educated argument in favor of allowing non-lawyer ownership of law firms, but everything I've seen so far, including the Economist article, is college-level tripe.



Here's the short version of my case for it:

1) the idea that lawyers judgment is going to be influenced by non-lawyer ownership is bunk. To the extent that lawyers' professional judgment is likely to be influenced by outside economic interests, I think it's already happening. Plus, there are plenty of other service industries that rely on the independent judgment of a professional, and corporate ownership hasn't ruined those industries.

2) If a publicly traded company can have a GC on the payroll without raising ethical concerns, are we really worried about lawyers remaining "independent" so as not to influence their judgment, or is it really about something less noble?

3) It's about balancing the tables: IBM can issue shares to the market, and use that money as they see fit, including to fund litigation. But, if their litigation adversaries are employees alleging discrimination, or shareholders alleging fraud, then those people must fund the litigation out of their pockets. Obviously this creates a tactical advantage that has nothing at all to do with the merits (or lack thereof) of any suit, so why not allow plaintiffs to fund their cases through investors. If frivolous litigation is the problem, let's find a way to penalize those suits, not penalize all plaintiffs regardless of merit.


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Re: non-lawyer law firm ownership

Postby Anonymous User » Mon Apr 02, 2012 4:27 pm

Funny this was just posted. I am currently doing research on this topic for my professor I RA for. She is going to write an article about it. I am researching how they do it in UK and Austrailia. She is against it, but thinks its inevitable. The Legal Services Act of 2007 in the UK allows for this.

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Re: non-lawyer law firm ownership

Postby spleenworship » Mon Apr 02, 2012 5:59 pm

Anonymous User wrote:Funny this was just posted. I am currently doing research on this topic for my professor I RA for. She is going to write an article about it. I am researching how they do it in UK and Austrailia. She is against it, but thinks its inevitable. The Legal Services Act of 2007 in the UK allows for this.



Does she give specifics as to why she thinks it is inevitable?

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Re: non-lawyer law firm ownership

Postby Anonymous User » Mon Apr 02, 2012 6:52 pm

spleenworship wrote:
Anonymous User wrote:Funny this was just posted. I am currently doing research on this topic for my professor I RA for. She is going to write an article about it. I am researching how they do it in UK and Austrailia. She is against it, but thinks its inevitable. The Legal Services Act of 2007 in the UK allows for this.



Does she give specifics as to why she thinks it is inevitable?


We are only in the beginning stages of the project, we met twice on it and I am just beginning research. However, from our discussions because it is allowed in the UK, eventually its inevitable it will happen here. She discussed how firms wont be able to compete with firms that do allow for non lawyer ownership. Also, she talked about potential issues/problems when a big firm with a UK office accepts non lawyer ownership, and the effect that has on its domestic offices. She also talked about how the same thing happened in other fields. She thinks its bad b/c the law field will lose its "professionalism" and lawyers will lose their ability to self regulate.

Shes a pretty big deal in the securities field, but again I don't know much yet, so IDK if that made any sesne haha. Right now just working on the background and writing a memo on the framework in the UK.

johndhi
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Re: non-lawyer law firm ownership

Postby johndhi » Mon Apr 02, 2012 9:49 pm

Litigation finance, man, a hot topic. I'm taking a class with probably the top guy in the field right now. Quick thoughts from the thread:

Yeah, UK just started with it and some U.S. investors have moved in over there. Agreed with whoever said this will make things look more like "big 4" accounting/consulting if it happens. Disagree with guy who says it's great for plaintiffs; defendants also can use litigation finance - for example, upcoming merger and want to get liability off your balance sheet to make it happen; sell liability to an investor.

Will comment more later.

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Re: non-lawyer law firm ownership

Postby Renzo » Tue Apr 03, 2012 1:02 am

johndhi wrote:Litigation finance, man, a hot topic. I'm taking a class with probably the top guy in the field right now. Quick thoughts from the thread:

Yeah, UK just started with it and some U.S. investors have moved in over there. Agreed with whoever said this will make things look more like "big 4" accounting/consulting if it happens. Disagree with guy who says it's great for plaintiffs; defendants also can use litigation finance - for example, upcoming merger and want to get liability off your balance sheet to make it happen; sell liability to an investor.

Will comment more later.


I also agree that at the biglaw end of the spectrum, there will be fewer single-role law firms, and more multi-service firms offering some combination of audits, accounting, legal advice, consulting, etc. Some biglaw types are pro-deregulation for this very reason; firms that have strong brand-names think they could make more money by diversifying.

However, I don't understand at all the notion of selling a liability. Who would buy the opportunity to pay a gigantic adverse judgment? Unless you mean you would offer someone money now, so that they would pay the judgment if it happened, in which case I think the term for that is "insurance." Plaintiffs' firms like the idea because it's a way to raise capital that is needed to fund contingency litigation; since defense lawyers don't work on contingency, I'm not sure I see your point.

spleenworship wrote:Ask optometrists or pharmacists how they feel about outside ownership of their profession.

This is a bad idea.


I don't see the parallell between ODs and pharmacists complaining about retail, and non-lawyer ownership of law firms. In fact, in my state and in every state I am familiar with, optometrists are required to be "independent" just the same as lawyers. There is currently nothing stopping Wal-Mart from contracting with an independent lawyer to provide legal services in-store, the same as they do with optometrists. So I don't see what that has to do with selling shares in a law firm to the general investing (non-lawyer) public.

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Re: non-lawyer law firm ownership

Postby johndhi » Wed Apr 04, 2012 12:40 pm

Renzo wrote:
johndhi wrote:Litigation finance, man, a hot topic. I'm taking a class with probably the top guy in the field right now. Quick thoughts from the thread:

Yeah, UK just started with it and some U.S. investors have moved in over there. Agreed with whoever said this will make things look more like "big 4" accounting/consulting if it happens. Disagree with guy who says it's great for plaintiffs; defendants also can use litigation finance - for example, upcoming merger and want to get liability off your balance sheet to make it happen; sell liability to an investor.

Will comment more later.


I also agree that at the biglaw end of the spectrum, there will be fewer single-role law firms, and more multi-service firms offering some combination of audits, accounting, legal advice, consulting, etc. Some biglaw types are pro-deregulation for this very reason; firms that have strong brand-names think they could make more money by diversifying.

However, I don't understand at all the notion of selling a liability. Who would buy the opportunity to pay a gigantic adverse judgment? Unless you mean you would offer someone money now, so that they would pay the judgment if it happened, in which case I think the term for that is "insurance." Plaintiffs' firms like the idea because it's a way to raise capital that is needed to fund contingency litigation; since defense lawyers don't work on contingency, I'm not sure I see your point.



Great question, Henzo. Three basic answers: first, insurance policies are not widely available for a lot of different types of dispute. For example, most contract disputes are not insurable. It's kind of like how "business risk" isn't insurable in business, but you can get a loan from a dude to do something risky. Dig? Second: the insurance industry doesn't offer after-the-event litigation insurance. You need to buy liability insurance BEFORE you get involved in this huge, fucked up lawsuit; new models of litigation finance would allow the pricing and purchasing of litigation risk DURING a litigation. Indeed, that's the best time for a lawyer to evaluate the risk of a litigation, right? We're talking about using the skills of a lawyer to determine how a lawsuit will pan out, not the skills of an insurer to determine how likely lawsuits are to come up. Finally, the purchase of insurance itself isn't itself free of risk; if you can sell your liability to someone for a fixed sum (expected value of the lawsuit plus a premium), you can plan your affairs today; if you're insured, you have to wonder what your fight with the insurer will be like to get the money you're owed - was this covered by the policy? is the adverse judgment above the policy's cap?

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Re: non-lawyer law firm ownership

Postby spleenworship » Wed Apr 04, 2012 12:57 pm

Renzo wrote:
I don't see the parallell between ODs and pharmacists complaining about retail, and non-lawyer ownership of law firms. In fact, in my state and in every state I am familiar with, optometrists are required to be "independent" just the same as lawyers. There is currently nothing stopping Wal-Mart from contracting with an independent lawyer to provide legal services in-store, the same as they do with optometrists. So I don't see what that has to do with selling shares in a law firm to the general investing (non-lawyer) public.


I think the problems with this in biglaw probably only have to do with conflicts of interest- you are 25% owned by Coca-Cola? You can't deal with anyone who might sue Coke, or is being sued by Coke or any of it's derivative companies.

But if you are seriously considering small law, or even midlaw, this should scare the crap out of you...

The parallels seem obvious to me: when someone not in the profession, specifically some asshat with an MBA, has input on how you run your business, things go downhill rapidly. You want to counsel a client for an hour at Walmart? Walmart won't like that, and they'll find someone else to come in. Aren't selling enough wills? Walmart will find someone else- and they'll set the number of wills you must sell per month at an absurdly high number so you can't even do anything more than boilerplate. Too much time in court? Walmart will tell you you need to settle more cases- Walmart is about volume.... lots and lots of clients who only need you for 15 minutes is what they want.... after all, they are getting a piece of the action. They own 25% of a biglaw firm, so they don't want you to litigate... they want you to settle. So even if it is in your clients best interests to have 50 or 60 hours of your time over the next few months... you will feel the pressure to settle or know that you will be replaced. Oh, and they'll totally get you to sign a non-compete in the field of law you practiced at Walmart so you can't take that client with you. Suddenly every choice you make is with the knowledge that if you don't maximize motherfucking Walmart's profits, you are probably going to be replaced.

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Re: non-lawyer law firm ownership

Postby Renzo » Wed Apr 04, 2012 1:36 pm

johndhi wrote:
Renzo wrote:
johndhi wrote:Litigation finance, man, a hot topic. I'm taking a class with probably the top guy in the field right now. Quick thoughts from the thread:

Yeah, UK just started with it and some U.S. investors have moved in over there. Agreed with whoever said this will make things look more like "big 4" accounting/consulting if it happens. Disagree with guy who says it's great for plaintiffs; defendants also can use litigation finance - for example, upcoming merger and want to get liability off your balance sheet to make it happen; sell liability to an investor.

Will comment more later.


I also agree that at the biglaw end of the spectrum, there will be fewer single-role law firms, and more multi-service firms offering some combination of audits, accounting, legal advice, consulting, etc. Some biglaw types are pro-deregulation for this very reason; firms that have strong brand-names think they could make more money by diversifying.

However, I don't understand at all the notion of selling a liability. Who would buy the opportunity to pay a gigantic adverse judgment? Unless you mean you would offer someone money now, so that they would pay the judgment if it happened, in which case I think the term for that is "insurance." Plaintiffs' firms like the idea because it's a way to raise capital that is needed to fund contingency litigation; since defense lawyers don't work on contingency, I'm not sure I see your point.



Great question, Henzo. Three basic answers: first, insurance policies are not widely available for a lot of different types of dispute. For example, most contract disputes are not insurable. It's kind of like how "business risk" isn't insurable in business, but you can get a loan from a dude to do something risky. Dig? Second: the insurance industry doesn't offer after-the-event litigation insurance. You need to buy liability insurance BEFORE you get involved in this huge, fucked up lawsuit; new models of litigation finance would allow the pricing and purchasing of litigation risk DURING a litigation. Indeed, that's the best time for a lawyer to evaluate the risk of a litigation, right? We're talking about using the skills of a lawyer to determine how a lawsuit will pan out, not the skills of an insurer to determine how likely lawsuits are to come up. Finally, the purchase of insurance itself isn't itself free of risk; if you can sell your liability to someone for a fixed sum (expected value of the lawsuit plus a premium), you can plan your affairs today; if you're insured, you have to wonder what your fight with the insurer will be like to get the money you're owed - was this covered by the policy? is the adverse judgment above the policy's cap?


Please, don't take this personally; but this is some crazy shit that only a law professor who has been too long detached from the real world could think up.

There is no impediment to insurers selling "adverse judgment" insurance, other than the fact that there is no market for it. If this were a workable model, insurers should be happy to sell a defendant a policy after a suit is filed for a sum that reflects the expected value of the liability (plus a reasonable return), then assume the defense of the suit (just as they would any other litigation) in order to minimize their exposure, and profit from it.

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Re: non-lawyer law firm ownership

Postby johndhi » Thu Apr 05, 2012 10:32 am

Renzo wrote:Please, don't take this personally; but this is some crazy shit that only a law professor who has been too long detached from the real world could think up.

There is no impediment to insurers selling "adverse judgment" insurance, other than the fact that there is no market for it. If this were a workable model, insurers should be happy to sell a defendant a policy after a suit is filed for a sum that reflects the expected value of the liability (plus a reasonable return), then assume the defense of the suit (just as they would any other litigation) in order to minimize their exposure, and profit from it.


"it doesn't exist so it isn't profitable" is not an entrepreneurial mindset, my friend. YGPM.

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Re: non-lawyer law firm ownership

Postby Renzo » Thu Apr 05, 2012 8:29 pm

johndhi wrote:
Renzo wrote:Please, don't take this personally; but this is some crazy shit that only a law professor who has been too long detached from the real world could think up.

There is no impediment to insurers selling "adverse judgment" insurance, other than the fact that there is no market for it. If this were a workable model, insurers should be happy to sell a defendant a policy after a suit is filed for a sum that reflects the expected value of the liability (plus a reasonable return), then assume the defense of the suit (just as they would any other litigation) in order to minimize their exposure, and profit from it.


"it doesn't exist so it isn't profitable" is not an entrepreneurial mindset, my friend. YGPM.


No, it's not. But this isn't an innovative, entrepreneurial idea: it's a fairly logical and obvious extension of the general liability products already in the marketplace, so asking why it doesn't exist is sort of like asking why no one sells a combination toaster/coffee maker--it's not because no one dreamed it up yet; it's because no one wants it.

ToTransferOrNot
Posts: 1928
Joined: Thu Jan 22, 2009 12:45 am

Re: non-lawyer law firm ownership

Postby ToTransferOrNot » Fri Apr 06, 2012 2:07 pm

Renzo wrote:
johndhi wrote:
Renzo wrote:Please, don't take this personally; but this is some crazy shit that only a law professor who has been too long detached from the real world could think up.

There is no impediment to insurers selling "adverse judgment" insurance, other than the fact that there is no market for it. If this were a workable model, insurers should be happy to sell a defendant a policy after a suit is filed for a sum that reflects the expected value of the liability (plus a reasonable return), then assume the defense of the suit (just as they would any other litigation) in order to minimize their exposure, and profit from it.


"it doesn't exist so it isn't profitable" is not an entrepreneurial mindset, my friend. YGPM.


No, it's not. But this isn't an innovative, entrepreneurial idea: it's a fairly logical and obvious extension of the general liability products already in the marketplace, so asking why it doesn't exist is sort of like asking why no one sells a combination toaster/coffee maker--it's not because no one dreamed it up yet; it's because no one wants it.


Defense-oriented litigation financing already exists (one example: --LinkRemoved--). The champerty and maintenance issues involved with defense-side are different than plaintiff-side, but they're still real (and thought about by actual practitioners). Defense-side lit financing is in its infancy compared to contingent fee stuff, but there's no reason to think we won't start seeing an expansion into things like adverse judgment "insurance."

Edit: also, --LinkRemoved--

Renzo
Posts: 4265
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Re: non-lawyer law firm ownership

Postby Renzo » Fri Apr 06, 2012 6:15 pm

ToTransferOrNot wrote:
Renzo wrote:
johndhi wrote:
Renzo wrote:Please, don't take this personally; but this is some crazy shit that only a law professor who has been too long detached from the real world could think up.

There is no impediment to insurers selling "adverse judgment" insurance, other than the fact that there is no market for it. If this were a workable model, insurers should be happy to sell a defendant a policy after a suit is filed for a sum that reflects the expected value of the liability (plus a reasonable return), then assume the defense of the suit (just as they would any other litigation) in order to minimize their exposure, and profit from it.


"it doesn't exist so it isn't profitable" is not an entrepreneurial mindset, my friend. YGPM.


No, it's not. But this isn't an innovative, entrepreneurial idea: it's a fairly logical and obvious extension of the general liability products already in the marketplace, so asking why it doesn't exist is sort of like asking why no one sells a combination toaster/coffee maker--it's not because no one dreamed it up yet; it's because no one wants it.


Defense-oriented litigation financing already exists (one example: --LinkRemoved--). The champerty and maintenance issues involved with defense-side are different than plaintiff-side, but they're still real (and thought about by actual practitioners). Defense-side lit financing is in its infancy compared to contingent fee stuff, but there's no reason to think we won't start seeing an expansion into things like adverse judgment "insurance."

Edit: also, --LinkRemoved--


So I was right that there is no barrier to selling the product, and wrong about there not being a market.

I feel like this is getting farther and farther afield from the topic of non-lawyer investment in firms, because we are now talking about insurance, and that's a fundamentally different issue. Insurers have for decades, maybe centuries, had the recognized right to include in contracts a rider that allows them to control litigation where they have interest. I don't see the parallell to allowing non-lawyers to have an equity investment in a law firm.

johndhi
Posts: 358
Joined: Sun Sep 27, 2009 11:25 am

Re: non-lawyer law firm ownership

Postby johndhi » Mon Apr 09, 2012 12:53 pm

Anonymous User wrote:Funny this was just posted. I am currently doing research on this topic for my professor I RA for. She is going to write an article about it. I am researching how they do it in UK and Austrailia. She is against it, but thinks its inevitable. The Legal Services Act of 2007 in the UK allows for this.


Hey Anon, would you mind PMing me? I have a question about the research you're doing. Does anyone know of a better way to get in contact with an Anon user?

thanks

johndhi
Posts: 358
Joined: Sun Sep 27, 2009 11:25 am

Re: non-lawyer law firm ownership

Postby johndhi » Tue Apr 10, 2012 10:22 pm

johndhi wrote:
Anonymous User wrote:Funny this was just posted. I am currently doing research on this topic for my professor I RA for. She is going to write an article about it. I am researching how they do it in UK and Austrailia. She is against it, but thinks its inevitable. The Legal Services Act of 2007 in the UK allows for this.


Hey Anon, would you mind PMing me? I have a question about the research you're doing. Does anyone know of a better way to get in contact with an Anon user?

thanks


sorry for shameless bump, but trying one more time.




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