Saturday, April 21, 2012

The Metaphor of the Immediately Obsolescent Business Plan - And What Does it Mean for Educating Some Kinds of Lawyers?

Posted by Jeff Lipshaw

I am teaching the last two sessions of my Unincorporated Business Entities class (LLCs, partnership, and limited partnerships, with agency mixed in).   We're at the endgame section, dealing with death, divorce, dissociation, dissolution, and other dire dilemmas of deal dissatisfaction.   Until this point, teaching the default rules has been a little like teaching music scales and exercises, with the real fun (as in real life) coming from the riffs and variations and improvisations on the themes that show up in these complex situations.  But the relationship between knowing the notes and making the music as a business lawyer is so hard to get across.  I was thinking about that, Bill's post about Law Without Walls, and the tunnel vision of lawyering (and, don't get me wrong, tunnel vision is entirely appropriate for some sub-disciplines of the law!) that constitutes a part of the "practical skills" complaint about modern legal education.

ImagesIt's the "how did we come to this?" backstory of these business divorce cases that I find fascinating, and the usual lawyer's lawyer treatment of them is to perpetuate the myth of legal perfectability.   In other words, had the lawyers been smart enough to think the problem through, the contract would have solved everything.  (Theorists take note:  this is an equal opportunity category error.  Lawyer-economists think the contract would have forestalled opportunism; lawyer-moralists think it would have reified the promise.)  The alternative metaphor that occurred to me a couple days ago came from one of my former bosses, Larry Bossidy (above), who spent 34 years at GE (rising to Vice-Chairman), and when it became clear he wasn't going to get to run GE (there was another guy named Welch who happened to be (a) his good friend, (b) a year younger, and (c) doing a pretty good job), he took over an industrial conglomerate then known as AlliedSignal (it's Honeywell now).  Bossidy's point was that an annual operating or business plan was likely to be obsolescent almost by the time you finished creating it - competitors would announce new products; commodity prices would spike; war would break out.  That wasn't to excuse shoddy planning, but to say that you had to keep updating the game plan as the game progressed.

Having said that, the number one goal Bossidy set for AlliedSignal every year I worked there was "Make the Numbers."  Invariably, as one of the leaders of the business, as well as one of its lawyers, I explained that as shorthand for "do what you promised" or "keep your commitments."  This raises a real life conundrum.  If your plan is obsolescent almost immediately, then how is it realistic to keep your promises?  If you promised so little as to make the numbers even if the world went to hell in a handbasket, then it was a sandbag, not a real promise.   If you can't keep your promise, what do you do?   Resign?  Get fired?  This was always a problem of leadership and management, because it involved more the legal algorithms of promise, which focus almost entirely on the rights of the promisee and the obligation of the promisor.  Instead, the relationship needed to be one of trust, thoughtfulness, objectivity, reasonableness, and accommodation as between promisor and promisee.

BraucherWhy isn't the same thing true of a complex relational agreement, like a partnership agreement or an LLC operating agreement?  I suspect it is.  When we held our symposium at Suffolk last year centered on Charles Fried's Contract as Promise, Jean Braucher (Arizona, left), a close associate of Stewart Macaulay and the Wisconsin "law-in-action" school, talked about the morality of the marketplace being "less the stern morality of promise keeping as a morality of adjustment, release, and forgiveness in contractual relations."  Lisa Bernstein's Bernstein Lisa (Chicago, right) work with Southern cotton brokers suggested that "promise or pay" was not the accepted moral stance; instead the reason you gave for breaking your promise mattered in the promisee's decision whether to accept the promise-breaking as an acceptable business practice.  (Jean's paper is here; Lisa didn't publish a paper with us, but I summarized her presentation in my introductory essay.)  I've suggested (more abstractly) that the perception of a duty not to enforce a promise is the grease that keeps relationships moving; a strict focus on rights would be the equivalent of metal on metal and the whole engine would grind to a halt.

So...  If you want law school to be practical, and you want it to do more than train litigators (whose orientation is the enforcement or opposition of legal rights and duties - and where some practitioners get to be appropriately tunnel-visioned), and you want lawyers to be "practice-ready" when they get out, and you don't want a lot of interdisciplinary theory, what do you do?

[Cross-posted at Legal Profession Blog.]

April 21, 2012 | Permalink | Comments (0)

Friday, April 20, 2012

"The Death Spiral of America's Big Law Firms"

That is the title of an essay posted on blog of the The Atlantic magazine.  Jordan Weissman, a journalist who formerly worked in the business operations side of a major law firm, reviews the profitability of the most elite law firms pre-crash (2001-2007) and post-crash (2007-2010). [See charts below]  The slide into lower profitability is what is causing the run-on-the-bank at Dewey LeBoeuf, a storied firm on the brink of collapse. 

Citi

Dewey LeBoeuf, like the Howrey firm which failed slightly over a year ago, are almost certainly on the lefthand side of the 2007 to 2010 profitability chart.    Weissman's conclusion is pretty simple: the industry is running out of gas.  More failures are likely.  Unfortunately, I agreed.

For the record, legal education's problems are no less severe.  There are not enough qualified students to fill the number of 1L seats, so as an industry, our revenues (akin to law firm profits) are going to go down.   The entire legal services and legal education industry is undergoing a major disruption.  All of this talk of structural change is going to move from the abstract, where we contest it the premise, to the concrete, which induces panic among the unprepared.  It is going to be very tough.  Our character is going to be tested. 

Paradoxically, making decisions based on our professional values rather than self-interest will be the key to survivial.  More on that later.  I have to prepare for the Lawyer of the Future Conference at Pepperdine University School of Law.

[posted by Bill Henderson]

April 20, 2012 in Blog posts worth reading, Cross industry comparisons, Current events, Data on the profession, Law Firms, Structural change | Permalink | Comments (3)

Tuesday, April 17, 2012

Frank Snyder's Lawyer Apocalypse

Frank-snyder1Frank Snyder (Texas Wesleyan) was one of the first real live law professors who reached out to me when I was a mere aspirant (albeit super-annuated) to the legal academy.  He is one of the most entertaining law professor writers around (unfortunately, not a high bar, but based objectively on my "wish-I-had-said-that-o-meter").  His essay Clouds of Mystery: Dispelling the Realist Rhetoric of the Uniform Commercial Code deftly demonstrates that the UCC merely substitutes one set of organizing algorithms for another, rather than create a contract law more "realistic" than the common law.  Late Night Thoughts on Blogging While Reading Duncan Kennedy's 'Legal Education and the Reproduction of Hierarchy' in an Arkansas Motel Room had me both laughing out loud and thinking seriously when I read an early version (Frank was an early blogger as founding editor of Contracts Prof Blog, one of our sister blogs in the Law Professor Blogs network).

Frank has made his triumphant return to the blogosphere in Lawyer Apocalypse, a blog that treats on much the same things Bill and I are talking about here.  Welcome back!

[Jeff Lipshaw]

April 17, 2012 | Permalink | Comments (0)