May 9, 2011
A Little Perspective on Legal Fees and the Legal Profession
The Wall Street Journal reports that Goldman Sachs spent $700 million on legal fees last year, including $434 million for outside counsel. This is a lot of money, although I'd note that Goldman also had more than $39.16 billion in revenues for 2010 (10-k pdf here).
At the New York Times Dealbook, Professor Peter Henning discusses the high costs of internal inquiries, which are often related to SEC and Justice Department investigations. Professor Henning explains that some companies, like Avon, have broad indemnification policies for employees that require the company to cover legal expenses for any investigations related to their employment, as long as employees agree to repay the expenses if indemnification is not warranted at the conclusion of the case. These costs are so high, though, that the legal fees often can't be recovered, because the employee simply doesn't have the means to repay the obligation.
Professor Henning closes with this:
Legal fees could easily run into the millions of dollars for any individual defendant, all payable — at least initially — by Avon. While crime does not pay, it sure can be lucrative for law firms.
On the one hand, this is true. But I can't help but take issue with posture of such statements. We don't very often hear something like, "While cancer is unfortunate, it sure can be lucrative for doctors." I continue to bristle at statements that expand the "ambulance chaser" narrative into the corporate context and make lawyers look like opportunists who are seeking to capitalize on the misfortune of others. I feel like a lot of us, whether in practice or in the academy, have unwittingly bought into this narrative. I know I have at times, and I don't mean to pick unfairly on Professor Henning.
Of course, I know there are lawyers who are opportunists, but that is not at all a fair charcterization of the profession in my experience. Most attorneys I know really believe in providing good representation for their clients, and they worry about their clients' well being. Suppose a client comes in and says she has been working for a company conducting overseas business. She's trying (as she should) to expand the business into a new area. She takes a few people to dinner, buys a few drinks, and the next thing she knows, the Justice Department is investgiating a Foreign Corrupt Practices Act claim against her. When she sits down in your office, I don't think the first thought most lawyers have is -- Cha-Ching! Maybe I have just worked with and for some really good people (and I have), but that is simply not my experience.
I like the concept that the legal profession is a noble profession, and I still believe it is largely true. As attorneys, I admit we often don't live up to the highest ideals, but that's doesn't make it not true. Failure is a human trait, and it is not true only of those in the legal profession. Doctors and clergy, for example, have had their failures, too.
It's easy to get angry at laywers for legal fees, especially in the litigation context, because the costs are usually to protect something the client already thought was theirs. That's true whether it's a criminal case (even if the defendant wins, the cost is usually to keep his or her freedom). And it's true in the civil context (where the defendant might be suing to get the benefit of his or her bargain). And the client may very well be right. But, ulimately, it was usually not the lawyer who created the problem; it was the investigator or the counterparty or the client, or some combination of those.
I guess I'm just done with accepting the current narrative. I may be a little bit of an idealist, but I'm still proud of the profession I chose, even when I'm not always proud of those in the profession. I think that those of us who still believe in what we do, and why we do it, need to be careful with our language, and be more focused on the bigger picture than we have been when discussing our profession. After all, it's what good lawyers do.
Maybe we should stop paying law professors hundreds of thousands of dollars so law school would be more affordable...then lawyers wouldn't have to be/feel justified charging so much.
Posted by: David | May 10, 2011 6:00:05 AM
For the most part, lawyers do not charge huge fees because of how much law school costs. Frankly, part of the problem for recent graduates is that some of them have so much debt, the job they can get, or the fees they can charge in the open market, cannot hope to cover their debt.
Your explanation of how law schools operate is not the full story, though. Some schools certainly do charge a lot of money and pay their faculty very well, although it is rarely, if ever, on par with the private sector or law firms. And rightly so. But I can assure you that's not the only story as someone who teaches at a law school with an annual tuition of about $10,000 per year for in-state students, and has a much more modest salary than what you describe.
Law schools and law professors can certainly do better, and many (and I think most) of us are trying to do that. We should be accountable when we don't, but I don't think them blame on this one is fairly attributable to us.
Posted by: Josh Fershee | May 10, 2011 10:02:58 AM