When you reward something, you get more of it. The U.S. News rating structure has long rewarded law schools based on the characteristics of their first-year applicants and students. By ignoring much of what happens subsequent to the first year, the U.S. News mechanism lures rational utility maximizers like the bright people in charge of George Washington University Law School into doing precisely what they are doing. If the bright people who run American University and other law schools within the GW locality don't like seeing many of their best rising 2Ls transfer to GW, we should expect to see them institute countermeasures.
This game of predator/prey, if you want to call it that, happens throughout the nation, and it affects many law schools. The GW/American example is noteworthy mostly because GW enjoys better than average opportunities to attract rising 2Ls away from other good law schools in the same city. These students would be foolish not to jump at the chance to have the name of a (supposedly) more prestigious law school on their diplomas and transcripts. The leaders at GW know this, and they are doing what good business dictates--maximizing financial gain while preserving (and even enhancing) their competitive edge.
The greater the number of highly-capable rising 2Ls GW can lure away from its nearby competitors like American, the more money GW will have at its disposal. These good students can be expected to graduate and pass the bar on the first attempt at a very high rate of success. They will be likely to secure acceptable law-degree-mandatory employment soon after graduation. They will burnish the reputation of GW throughout their professional careers. And they will probably become generous alumni who will support GW with their charitable contributions for decades to come. Meanwhile, American suffers a decline in tuition revenue from its 2L and 3L class. The students who don't transfer are possibly less capable, and may fail to graduate or to pass the bar at higher rates than those who did transfer. The less-capable students who do graduate and pass the bar may have more difficulty finding appropriate jobs, and may be less able to support American as gift-giving alums. Meanwhile, GW's U.S. News ranking remains high, or even climbs higher, while American's ranking slips. This only feeds the spiral for further rounds of similar phenomena, into the future.
It might make us feel a little better if we castigate the leaders at GW for predatory poaching, but figuring out how to make more money, within the constraints of the law, is what almost all people do, regardless of their job or official title. For countless leaders and managers who are responsible for making and adhering to a budget, one of their duties is to generate a surplus of revenue over expense, whether we call that "profit" or any other term. We have created a monster that menaces legal education.
We tacitly endorse the U.S. News system, with its myriad defects, and we can't pretend to be shocked when GW and other law schools behave in their own self-interest within that system. The U.S. News rankings overemphasize selectivity, along with the UGPA and LSAT statistics of the 1L class, while ignoring these measures for the students beyond that point. They also stress questionable and manipulation-prone criteria such as "peer assessment," "assessment by lawyers/judges," "faculty resources" and "library resources." Any law school that can generate more revenue while preserving the appearance of selectivity/high applicant credentials will be rewarded with more money to spend on other aspects of the U.S. News picture.
Frankly, we need to do more than shame GW for doing what the system encourages it to do. We need to reform the system itself. That, unfortunately, is far more difficult than pointing fingers at law schools that are trying to manage their income and expenses in a responsible manner.