A loyal reader (requesting anonymity as he’s not authorized to speak for his firm) writes:
You and other commentators (Richard Susskind comes to mind) make a case for a more efficient, industrialized, less hand-crafted practice of law.
I note, however, that several innovators (admittedly at the low-end) who have tried to do this have been excoriated recently. See, for example, this Reuters article on assembly-line foreclosures, or the misadventures of David Stern, or the reaction to settlement mills, or recent exposes of collection firms.
We at the top end of the profession may despise these innovations, but frankly, the big changes are happening at the bottom of the profession because bespoke lawyering simply is economically impossible there.
And when it comes to light, there is public and professional revulsion and attempts to push these practices back toward bespoke lawyering – trying to reverse the tide, as it were.Of course, none of this seems to be relevant to your consulting practice or to the 20% or less of lawyers who are at the top end of the bi-modal distribution. Of course your advocacy of knowledge management, efficiencies, aligning the lawyer’s incentives with the client’s and so on could not possibly imply that we will ever adopt the practices of a settlement mill or a robosigning firm. However, I get the impression that you are advocating marginal change while the big changes are evolving below.
The Reuters article covers the missteps bordering on fraud of Lender Processing Services, or LPS (emphasis supplied):
[A] Reuters investigation shows that LPS’s legal woes are more serious than [CEO Jeff Carbiener] let on. Public records reveal that the company’s LPS Default Solutions unit produced documents of dubious authenticity in far larger quantities than it has disclosed, and over a much longer timespan.
Questionable signing and notarization practices weren’t limited to its subsidiary, called DocX, but occurred in at least one of LPS’s own offices, mortgage assignments filed in county recorders’ offices show. And rather than halt such practices after the federal investigation got underway, the company shifted the signing to firms with which it has close business ties. LPS provided personnel to work in the new signing operations, according to information from an LPS spokeswoman and court records including an October 21 ruling by a judge in Brooklyn, New York. Records in county recorders’ offices, and in the judge’s opinion, show that “robosigning” and preparation of apparently false documents went on at these sites on a large scale.
In one instance, it helped set up a massive signing operation at the nearby office of a major client, a spokeswoman for the client, American Home Mortgage Servicing, confirmed. LPS-hired notaries who worked there said in interviews that troves of documents were improperly handled. They said that about 200 affidavits per day were robosigned during the two months the two notaries remained there.
[…]
The criminal investigation in Jacksonville by federal prosecutors and the Federal Bureau of Investigation is intensifying. The same goes for a separate inquiry by the Florida attorney general’s office. Individuals with direct knowledge of the federal inquiry said that prosecutors have impaneled a grand jury, begun calling witnesses and subpoenaed records from LPS.
[…]Meanwhile, the threats from four class action lawsuits filed in federal courts appear to be greater than the company has indicated, especially one filed in Mississippi. In a highly unusual move, a unit of the U.S. Justice Department has joined that suit as a plaintiff. The lawsuit alleges that LPS extracted many millions of dollars in kickbacks from law firms through an illegal fee-sharing arrangement, in exchange for doling out lucrative foreclosure work to them.
The lawsuit also charges that LPS illegally practices law and routinely misleads homeowners and federal bankruptcy judges. Carbiener has said there is little reason to worry about the Mississippi suit because the company already prevailed in a federal lawsuit in Texas that had made nearly identical accusations. But court records in that case show that the lawsuit was dropped without any ruling on the merits of the allegations.
Copies of LPS internal documents obtained by Reuters and testimony in lawsuits shed new light on the company’s unusual dealings with its vast network of law firms. LPS relentlessly pressed them for speed. The result was almost instant filing of foreclosure documents, mostly prepared by clerical workers, not lawyers, according to court records, including deposition testimony by LPS officials. Several judicial opinions from around the country and evidence from investigations in Florida show that these documents often were riddled with inaccurate information about the amount homeowners owed, and were signed and notarized en masse without anyone at the firms checking the information in them.
Under LPS’s system, law firms that were slower, often because their lawyers carefully prepared and reviewed court documents before filing them, were effectively punished, according to deposition testimony and other sources. The computer automatically assigned bad ratings to these firms, and the flow of work assignments to them dried up.
[…]LPS’s own records underline that the company keeps its clients happy and maximizes its own fee income by whipping law firms to gallop cases through the courts.
The law firms are on a stopwatch: Kersch confirmed that the LPS Desktop system automatically times how long each firm takes to complete a task. It assigns firms that turn out work the fastest a “green” rating; slower ones “yellow” and “red” for those that take the longest.
Court records show that green ratings go to firms that jump on offered assignments from their LPS computer screens and almost instantly turn out ready-to-file court pleadings, often using teams of low-skilled clerical workers with little oversight from the lawyers. Copies of company newsletters from shortly before LPS was spun off show that the company each year gave awards to the law firms that were consistently the fastest.
Firms that move more slowly were slapped with “red” designations. For them, work offers dried up.
And as for David Stern:
The law offices of David J. Stern and an associated company are laying off 70 percent of its combined staff, according to an email sent to employees Thursday. The terminations come two days after mortgage giants Fannie Mae and Freddie Mac severed ties with the firm. “There’s been a substantial reduction in staff, it started happening over the past few weeks and many employees received notice today,” said Jeffrey Tew, a lawyer representing the Stern firm.
In the e-mail to employees, Stern said the referral of new business has decreased by over 90 percent in the last six months. “While we are doing everything possible to guide the company successfully through these difficult times, these developments mandate that we take immediate action to align the business with current realities,” Stern said in the e-mail.
Tew said the firm originally employed about 1,000 people.
The law firm, which handles Florida foreclosures for major lenders, is under investigation by the Florida Attorney General for sloppy work and fabricating key documents used to complete foreclosures.
The attorney general’s office last month released two sworn statements by former employees detailing a secret system designed to speed up foreclosures. The employees testified that staff signed documents without reading them or signed them outside of the presence of a notary. The employees allege that attorneys and staff members forged signatures, changed dates and passed around notary stamps.
Some employees were given jewelry, cars and houses from the firm in exchange for altering and forging key documents used to process foreclosures, one of the former employees said in a statement released Monday by the Attorney General.
Gruesome stuff indeed: Jewelry, cars, and houses (houses!) for committing fraud, and green/yellow/red ratings for firms based on how fast they can “gallop” to the courthouse?
You may be saying to yourself–I certainly said to myself–that these are not examples of aggressive attempts at wringing inefficiency out of processes, that they are something else entirely: Egregious, shocking displays of naked criminality.
And I would agree.
But let’s go back to our correspondent’s point, while nodding in anticipation that the resolution of these matters may yet again vindicate the timeless proposition that hard cases make bad law. (By that I mean I don’t think courts are well situated to attempt to dictate the economics of legal practice, and I hope they confine their findings to fraud.)
I believe this is the core of his argument:
Of course, none of this seems to be relevant to your consulting practice or to the 20% or less of lawyers who are at the top end of the bi-modal distribution. Of course your advocacy of knowledge management, efficiencies, aligning the lawyer’s incentives with the client’s and so on could not possibly imply that we will ever adopt the practices of a settlement mill or a robosigning firm. However, I get the impression that you are advocating marginal change while the big changes are evolving below.
Evidently, I need to clarify what I’m advocating.
For starters, Adam Smith, Esq., by and large (not exclusively) addresses itself to, and assumes that its primary audience is, people, practitioners, and firms at or much nearer our friend’s “20%” than to “the low-end”. Of course, as he notes, we very much address KM, wringing out sheerly wasteful costs, and–forcefully–aligning lawyers’ incentives with their clients’. But I fear that characterizing this as “marginal change” reveals that I have not been clear about how I see our profession (which, I repeat, is also an industry) evolving.
Our friend is absolutely right that “the big changes are evolving below”–as we’ve seen with Thomson Reuters’ acquisition of Pangaea, among many many other tea leaves. Outsourcing/disintermediating/re-engineering is very much here to stay, and is in a profound sense irreversible. It’s an economic dynamic which has been true for centuries, and was perhaps initially described most ably by Adam Smith himself in his pin factory discussion. (He described the dynamic which drives this, if not its fact in what he portrayed as a vertically integrated pin factory.)
But again, to characterize my view of what’s changing at the top end as “marginal” is close, but not quite right.
My real view is that some things we do are rapidly moving down the food chain and entirely out of the purview of what we will be doing in a very few short years. We are sloughing off everything that can be done at substantially less cost–and, caveat of caveats, with equivalent quality–elsewhere than in the hallowed halls of the AmLaw 200 or the Global 50. Whether or not we want this, clients will make it so.
But the things we exist to do and that only we can do–the 20%–are, in a way that should not seem ironic or surprising, more valuable than ever.
You know that I often like to rely on analogies from other industries so as to abstract from our unspoken assumptions about our own world, so consider the evolution of the auto industry over the past decade or so. Cars of today are about the same price as 10 years ago (in constant dollars) but are of amazingly greater quality: Cleaner, more fuel efficient, safer, chock full of microchips, with features unimaginable or cost-prohibitive then, such as electronic stability control–not to mention such conventional amenities as dual-zone climate systems. Features that were available only on the BMWs and Lexus’s of the world are now in Honda Civics and Toyota Corollas.
Which leads to the question: How do BMW and Lexus continue to differentiate themselves?
By continually, nay relentlessly, moving up the food chain. If electronic stability control has become a commodity, as antilock brakes became before it, then we need to introduce active full-time four-wheel drive. If four-speed automatic transmissions are a commodity, we’ll go to six speeds.
I submit that we find ourselves in the same position.
Now, I hasten to admit that the analogy between BigLaw and Global Cardom is inapt in many ways. Just for starters, they have Moore’s Law on their side and we don’t. But look at what we do have in common:
- A global market for our services
- The ability, fast becoming the requirement, to globally source our talent
- An increasingly integrated–which can mean more resilient or more fragile, depending on the context–worldwide economy
- Increasing, and often inconsistent, regulation
- A ceaseless innovation imperative.
So “marginal change” is not what I’m advocating. I’m advocating sectoral change, if you will.
There are, simply put, some things we should not be doing and which clients won’t indulge us in doing. But for everything else we do, we don’t have to change it “marginally:” We have to insist on continuing to do it with ever greater exactitude, insight, and imagination. And ceaselessly move into the future.
