Monday, January 11, 2016

Building the Legal Startup

If I were in northern California tomorrow evening, I would be headed to Stanford Law to attend this interesting program:

CodexBuilding the Legal Start-up

January 12 @ 5:00 pm - 8:00 pm 
5:00 – 9:00pm
Room 290, Stanford Law School

The event is sponsored by CodeX – The Stanford Center for Legal Informatics and Evolve Law.  Some very accomplished start-up folks are participating, including Eddie Hartman (LegalZoom), Josh King (Avvo), Steven Silberbach (Clio), and Jeroen Plink (advisor to Kira Systems who also built Practical Law Company's US operations before the sale to Thomson Reuters).  

The program is free and open to the public.  For those lucky enough to be near by, you can register here.  Remarkably, it is also broadcast live over the web!  

There is no question that northern California has become the hotbed location for legal start-ups.  Stanford Law is ideally situated to both study and facilitate this evolution.

January 11, 2016 in Current events, Innovations in law, New and Noteworthy | Permalink | Comments (0)

Monday, December 21, 2015

"Income at KPMG legal up 53 per cent"

GlobalegalpostThat is the headline this morning from the Global Legal Post, a publication that compiles legal news from around the world. The context is the UK, where changes in legal regulations now permit nonlawyers to own and control legal enterprises through alternative business structures, or ABSs.  

Victoria Basham writes:

KPMG, one of the Big Four accountancy firms to offer legal services through an alternative business structure, has reported a huge rise in income from the division and pledged further investment.

Net sales in its fledgling legal services division climbed 53 per cent in the year to 30 September. The firm’s newly-published annual report comments: ‘Despite [this growth] being from a relatively low base, it’s clear that clients really like our idea of wrapping multi-disciplinary legal advice around our other propositions.

Continue to invest

The report added that the firm would continue to invest heavily in new hires to grow the business in both existing and new areas, including corporate crime and regulation.

The story reports that three of the Big Four now offer legal services under an ABS license.  Basham credits the The Law Society Gazette as her source.

Related posts:

December 21, 2015 in Cross industry comparisons, Current events, Structural change | Permalink | Comments (0)

Sunday, December 6, 2015

The Opaqueness of Bar Passage Data and the Need for Greater Transparency

There has been a great deal of discussion lately over at The Faculty Lounge regarding declines in law school admissions standards, declines in bar passage rates, and the general relationship between LSAT scores and bar passage. Much of this discussion is clouded by the lack of meaningful data regarding bar passage results.  In this blog posting I will delineate several questions that just cannot be answered meaningfully based on the presently available bar passage data.

The national first-time bar passage rate among graduates of ABA-accredited law schools fell significantly in 2014. According to the NCBE’s statistics, the average pass rate from 2007-2013 for July first-time test-takers from ABA-accredited law schools was 83.6%, but fell to 78% in 2014. (2015 data won’t be available until next Spring when it is released by the NCBE.)

While there might be some reasons to believe these results were somewhat aberrational given that the objective criteria of the entering class in 2011 was only modestly less robust than the objective criteria of the entering class in 2010, and given the ExamSoft debacle with the July 2014 bar exam, the results are concerning, given that the objective criteria of the entering classes in 2012, 2013 and 2014 showed continued erosion. As the last two years have seen declines in the median MBE scaled score among those taking the July bar exam, the changes in entering class credentials over time suggest further declines in median MBE scaled scores (and bar passage rates) may be on the horizon.

In 2010, there were roughly 1,800 matriculants nationwide with LSATs of 144 or less. In 2012, there were roughly 2,600 matriculants nationwide with LSATs of 144 or less. In 2014, there were roughly 3,200 matriculants nationwide with LSATs of 144 or less. Recognizing that law school grades will be a better predictor of bar passage than LSAT scores, I think it is safe to say that entering law students with LSATs in this range are more likely than entering law students with higher LSATs to struggle on the bar exam.  Because the number of those entering law school with LSAT scores of 144 or less has grown substantially (particularly as a percentage of the entering class, more than doubling from less than 4% in 2010 to more than 8% in 2014), many are concerned that bar passage rates will continue to decline in the coming years.

While there has been a great deal of discussion regarding declines in admission standards and corresponding declines in bar passage standards, this discussion is profoundly limited because the lack of meaningful bar passage data presently provided by state boards of law examiners and by the ABA and ABA-accredited law schools means that we do not have answers to several important questions that would inform this discussion.

  1. What number/percentage of graduates from each law school (and collectively across law schools) sits for the bar exam in July following graduation and in the following February? Phrased differently, what number/percentage of graduates do not take a bar exam in the year following graduation?

This is a profoundly important set of questions as we look at employment outcomes and the number/percentage of graduates employed in full-time, long-term bar passage required positions. Given that only those who pass the bar exam can be in full-time, long-term bar passage required positions, it would be helpful to know the number/percentage of graduates who “sought” eligibility for such positions by taking a bar exam and the number/percentage of graduates who did not seek such eligibility. It also would be helpful to understand whether there are significant variations across law schools in terms of the number of graduates who take a bar exam (or do not take a bar exam) and whether those who do not take a bar exam are distributed throughout the graduating class at a given law school or are concentrated among those at the bottom of the graduating class. At present, however, this information simply is not available.

  1. What is the first-time, bar passage rate for graduates from ABA-accredited law schools?

One might think this would be known as ABA-accredited law schools are required to report first-time bar passage results. But the way in which first-time bar passage results are reported makes the data relatively unhelpful. Law schools are not required to report first-time bar passage for all graduates or even for all graduates who took a bar exam. Rather, law schools are only required to report first-time bar passage results for at least 70% of the total number of graduates each year. This means we do not know anything about first-time bar passage results for up to 30% of graduates of a given law school. Across all law schools, reported results account for roughly 84% of graduates, leaving a not insignificant margin of error with respect to estimating bar passage rates.

People would have been flabbergasted if the ABA had required reporting of employment outcomes for only 70% of graduates. Now that the ABA is requiring reporting on employment outcomes for all graduates, there is no good reason why the ABA should not be requiring bar passage accounting for all graduates, requiring law schools to note those who didn't take a bar exam, those who took and passed a bar exam, those who took and failed a bar exam, and those for whom bar status is unknown.  (Up until recently, some boards of law examiners were not reporting results to law schools, but my understanding is that the number of state boards of law examiners not reporting results to law schools is now fairly small.)

Notably, for 2011, 2012, and 2013, the average bar passage rate for first-time takers from all ABA-accredited law schools based on data reported by the law schools was consistently higher than the data reported by NCBE for the corresponding years (2011 – 83.8% v. 82%, 2012 – 81.8% v. 79%, 2013 – 82.4% v. 81%. (Moreover, first-time takers are not measured equivalently by the ABA and by the NCBE. The ABA reporting requirement focuses on graduates who took any bar exam for the first-time. The NCBE defines as first-time takers any person taking a bar exam in a given jurisdiction for the first-time. Thus, the NCBE set of first-time takers is broader, as it includes some people taking a bar exam for the second time (having taken the bar exam in another jurisdiction previously).

  1. What is the “ultimate” bar passage rate for graduates from ABA-accredited law schools?

Even though a number of commenters have noted that “ultimate” bar passage is more important than first-time bar passage, there is no publicly available data indicating the ultimate bar passage rate on a law school by law school basis for the graduates of each ABA-accredited law school. What number/percentage of graduates of a given law school who take a bar exam pass after the second attempt? What number/percentage of graduates of a given law school who take a bar exam pass after the third attempt? What number/percentage of graduates of a given law school never pass a bar exam? This information just is not publicly available at present.

While Standard 316, the bar passage accreditation standard, allows schools to meet the standard by demonstrating that 75% or more of those graduates who sat for a bar exam in the five most recent calendar years passed a bar exam, this “ultimate” bar passage data is not publicly disseminated. Thus, while first-time bar passage data is limited and incomplete for the reasons noted above, “ultimate” bar passage data on a law school by law school basis is actually not available.

The modest amount of information available on “ultimate” bar passage rates is not very helpful.  The LSAC National Longitudinal Bar Passage Study contains some analysis of "ultimate" bar passage rates, but it focused on the entering class in the fall of 1991, which it described as being “among the most academically able ever to enter” law school based on entering class statistics (page 14), a description that could not be used with the classes that have entered in the last year or two or three. It also does not contain any information about "ultimate" bar passage for graduates of individual law schools.  In addition, Law School Transparency has recently received some information from at least one law school that has requested anonymity. Much better “ultimate” bar passage information is needed to better inform many of the discussions about the relationship between entering class credentials and bar passage.

  1. How can we compare bar passage results from one jurisdiction to another?

Most state boards of law examiners do not present data regarding bar passage that allows reasonable bases for analyzing the results in ways that provide meaningful insight and a meaningful basis for comparison. Fewer than one-third of states publicly provide information in which a delineation is made between first-time takers and repeat takers on a law school by law school basis and only a few of these provide information about MBE scores on a school by school basis. Accordingly, it is very difficult to make meaningful comparisons of year-over-year results in the months following the July bar exam, because data is rarely reported in a consistent manner. The NCBE does provide statistics annually (in the spring) which includes a delineation of bar passage rates by state based on first-time test takers from ABA-accredited schools, but the NCBE does not provide MBE scores on a state by state basis (although it seemingly should be able to do this).

Conclusion

There is a need for much greater transparency in bar passage data from boards of law examiners and from the ABA and ABA-accredited law schools. It well may be that some law schools would be a more meaningful investment for "at-risk" students, those whose entering credentials might suggest they are at risk of failing the bar exam, because those law schools have done a better job of helping "at risk" students learn the law so that they are capable of passing the bar exam at higher rates than graduates of other law schools with comparable numbers of at risk students. It may well be that some jurisdictions provide "at risk" students a greater likelihood of passing the bar exam.  At the moment, however, that information just isn’t available. Much of the disagreement among various commentators about the relationships between admission standards and bar passage rates could be resolved with greater transparency – with the availability of much better data regarding bar passage results.

December 6, 2015 in Current events, Data on legal education, Scholarship on legal education | Permalink | Comments (0)

Thursday, December 3, 2015

"PwC expands into legal market"

FinancialReviewThat's the headline from the Financial Review, a leading Australian business newspaper.  The plot is nearly identical to a September post regarding accounting firms in India. See India, Big 4 and Elite Law Firms in Direct Competition for Highly Lucrative Advisory Work, LWB, Sept 16, 2015.   The salient point is not that accounting firms are outmaneuvering the law firms -- they're not, as both stories report a robust flow of laterals in both directions.  Rather, it's that the accounting firms are in the game at all. 

The story reports:

"There are bigger issues - alternative legal providers, the changing demands of what our people want in terms of non-lineal career paths, the cost pressures on our clients and the demands they place on their lawyers," Baker & McKenzie national managing partner Chris Freeland said.

"That's what keeps me awake at night," he said.

Behind closed doors, however, [the law firms] are genuinely worried about the accounting firms cutting into compliance, due diligence, employment and taxation work, and mergers and acquisitions advisory particularly in infrastructure and inbound investment.

Large law firms identified the accountants as their main rivals in a recent Macquarie Group legal benchmarking survey.

Some law firms are quietly shifting work to boutique accounting firms because they refuse to be in bed with their emerging adversaries.

The Australian legal market liberalized several years, making it possible for nonlawyers to own and control legal enterprises.  In contrast, India has rules that are much closer to the U.S.  Yet, when it comes to the accounting firms, the official rules don't seem to matter much, as the competitive dynamics vis-a-vis big accounting firms in these two countries are very similar.  

A simple explanation is that bar authorities in any country are loath to pursue unauthorized practice of law actions when the clients are multinational corporations and the providers are large accounting firms.  That is too big a fight.  Further, the rules on unauthorized practice are in place to protect clients, not the guild.  Thus, it is not surprising that the accounting firms are getting bolder.  

 The chart below (from The Economist) put things into perspective:

Accountantslawyers

See Attack of the Bean-Counters, Economist, Mar 21, 2015.

December 3, 2015 in Blog posts worth reading, Cross industry comparisons, Current events, Data on the profession, Law Firms, Structural change | Permalink | Comments (2)

Sunday, November 29, 2015

The UK's Apprenticeship Levy -- a helpful reset to the legal labor market?

LawsocietyThe Law Society Gazette reports a new apprenticeship levy that will be imposed in 2017 on UK employers with more than £3 million in payroll.  The Gazette notes that the levy, which totals .5% of payroll, will sweep in nearly 200 legal employers. 

The program has a potentially clever twist that could prove to be an effective economic stimulus for the UK economy. Employers get a credit for the cost of their current apprenticeship programs.  For the UK legal industry, this means that the bigger firms will be fully paid up just by running their current training contract programs. Yet, the article also notes that "the levy may force a number of firms to develop apprenticeship programmes so that they get their money back."

This is an idea that draws on both liberal and conservative principles.  It's liberal because it mandates, through a tax, a strong national policy that favors human capital creation. Yet, it's also conservative because it lets employers opt out of the tax by running their own apprenticeship programs.  The result is an increase in paid entry-level training for young people and, invariably, some infrastructure being developed around ongoing apprenticeship programs, likely from nonprofits and trade associations who serve or orbit around specific industries. 

In the United States, there are roughly 3,000 law firm employers with a payroll of $5 million or more.  They account for roughly half of the $91 billion annual payroll of all US law firms (NAICS 541110 Offices of Lawyers).  Many law firms are not hiring because client demand is sluggish and it's perceived as more cost effective to use senior personnel who are already trained.  As a result, the US legal profession is graying significantly.  See Is the Legal Profession Showing Its Age, LWB, Oct 12, 2014; What is Driving the Demographic Gap between BigLaw Leaders and their CEO/GC Clients?, LWB, Sept 1. 2015.  

Consider the benefits of a program like this operating in the US.  A .5% apprenticeship levy on $45 billion would mean that no less than $225 million per year would be invested in entry-level training contracts in the legal field, with a significant number of legal employers getting off the sidelines to create their own programs.  Astute bar associations would likely step in to provide logistical and administrative support.  Further, the US Department of Labor already has a detailed legal framework around apprenticeships.

With this kind of financial and administrative support, it is plausible to imagine the US legal profession moving to a true apprenticeship model where training contracts replace the 3L year of law school.  I acknowledge this all sounds very fanciful, but a relatively modest employer apprenticeship tax may be better national policy that asking young people to take on more education-related debt. 

November 29, 2015 in Current events, Innovations in law, New and Noteworthy, Structural change | Permalink | Comments (1)

Sunday, October 25, 2015

Is there a right way to respond to the "Law School Debt Crisis" Editorial?

Amidst all the other newsworthy topics, the New York Times editorial board made law school debt the lead editorial for today's Sunday edition. And the story line is not good.  

The editorial starts with the bleak statistics for Florida Coastal Law School -- low median LSAT scores and high debt loads, casting doubt on whether its graduates can pass the bar exam and repay their federally financed student loans.  The editorial highlights Florida Coastal' for-profit status but goes on to note that the rest of legal education is not much better. 

A majority of American law schools, which have nonprofit status, are increasingly engaging in such behavior, and in the process threatening the future of legal education.

Why? The most significant explanation is also the simplest — free money.

The editorial details changes in federal higher education finance that created the Direct PLUS Loan program, which, over-and-above Federal Stafford Loans, underwrites up to the full cost of attendance as determined by each law school.  The combination of poor job prospects and high debt have depressed applicant volume.  As the Times editorial notes, the systemic impact has been to lower admissions standards to sweep in students who will, as a group, struggle to pass the bar exam following graduation.  Virtually all of this is financed by DOE loan money.

I don't think the typical member of the legal academy understands the precarious financial condition of legal education.  The precariousness exists on two levels: (1) our financial fate is in the hands of the federal government rather than private markets; and (2) the Times editorial suggests that we have a serious appearance problem, which draws down the political capital needed to control our own destiny.  With the political winds so goes our budgets. 

I think it is important for the Association of American Law Schools (AALS) to take some decisive action in the very near future.  In this blog post, I explain where the money comes from to keep the law school doors open and why, as a consequence, we need to pay closer attention to the public image of legal education.  I then offer some unsolicited advice to the AALS leadership. 

(1) Who pays our bills?  

Over the last decade, the federal government has, as a practical matter, taken over the financing of higher ed, including legal education.  

Here is how it works.  Any law student who needs to borrow money to attend law school is strongly incentivized to borrow money from the Department of Education (DOE).  Although the DOE loans carry high interest rates -- 6.8% for Stafford Loans and 7.9% for Grad Plus -- they include built-in debt relief programs that functionally act as insurance policies for the risk that a graduate's income is insufficient to make timely loan repayments.  Law school financial aid offices are set up around this financial aid model and make it very easy for students to sign the loan documents, pay their tuition, and get disbursements for living expenses.

In the short to medium term, this is good for the federal government because the loans are viewed as income-producing assets in the budgets that get presented to and approved by Congress. But in the longer term this could backfire if a large portion of students fail to repay their full loans plus interest.  Federal government accounting rules don't require projections beyond ten years.  But already the government is beginning to see the size of the coming write-downs for the large number of graduates who are utilizing the Public Service Loan Forgiven program, which has a ten-year loan forgiveness horizon. And it is causing the feds to revise their budgets in ways that are politically painful.  With the loan forgiveness programs for private sector law grads operating on a 20- to 25-year repayment window, the magnitude of this problem will only grow.  

The enormous risk here for law schools is that Congress or the DOE will change this system of higher education finance.  For example, the Times editorial calls for capping the amount of federal loans that can be used to finance a law degree.  Currently, the limit on Stafford Loans for graduate education is $20,500, but Grad Plus loans have no limit at all.  If the DOE were to cap Grad Plus at $29,500 per year, leading to a total three-year federal outlay of $150,000 per law student, this would have an enormous adverse impact on the typical law school budget.

Law School Transparency reports that the average law school debt load for a 2014 law graduate is $118,570, but we know very little about the full distribution.  Because of the pervasiveness of the reverse Robin Hood policy, which uses tuition dollars of low credentialed students to finance scholarships for their high credentialed peers, there is likely a significant percentage of students at most law schools who graduate with more than $150,000 in law school debt.   Further, according to US News, there are twelve law schools -- including three in the T14 -- where the average law school debt load is more the $150,000.  Although there are no statistics on the percentage of law students graduating with greater than $200,000 in law school debt, law students tell me this amount is common. 

I have translated this meager public information into the chart below. The area in green is the volume of money that could disappear from law school budgets if the federal government imposed a hard limit on federally financed law school lending.

Lawschooldebtv3

Why would this money be at grave risk?  Two reasons:

First, private lenders will be reluctant to cover the entire shortfall.  For decades, private lenders played an important roll in law school finance.  But these lenders got pushed out of the market by the changes in federal higher ed finances described above.  Unfortunately, in the intervening years, the ratio of earning-power-to-debt has gotten too far out of whack.  To come back into this market, private lenders would need to be confident that loans would be repaid.  That likelihood is going to vary by law school and by law student, raising the cost of lending.  This means that, to varying degrees, virtually all law schools would have to sweat over money.  Unlike Grad Plus, private lenders may balk at financing full sticker tuition for lower credentialed students trying to attend the highest ranked school that admitted them.

Second, private lenders will not offer the same loan forgiveness options, such as IBR and Public Service Loan Forgiveness, currently offered by the federal government.  With the curtailed scope of these functional insurance programs, some portion of prospective law students will likely be unwilling to sign loan documents in excess of the federal lending cap.  Even very elite schools will feel the pain here.

(2) An appearance problem in the world of politics

I would bet a lot of money that law faculty have been emailing the Times editorial to one another, criticizing its lack of nuance.  But here is our problem.  We are not in a court where a judge will listen to our elegant presentation of facts and law.  Nor are we in the world of private markets where we can expect people to reliably follow their own economic self-interest.  We are in the realm of politics where sides get drawn based on appearance and political expediency.  To make matters worse, the legal academy just got lambasted by the paper of record on the left.

It is hard to argue that a cap on federal funding of legal education would be bad policy for students, the legal profession, taxpayers, or broader society.  Such a change would:

  1. Reduce the number of law grads going into a saturated labor market;
  2. Reduce the number of low credentialed students admitted to law school who will one day struggle to pass the bar;
  3. Reduce the risk of nonpayment of students loans currently borne by US taxpayers;
  4. Put in place serious cost-containment on legal education.

For law schools, however, such a change would produce layoffs and pay reductions.  And that may be the fate of the luckier schools.   It is widely known that most law schools are running deficits.  Central universities are looking for ways to wait out the storm.  But the cliff-like quality of a federal cap on law school lending would call the question of how much support is too much.  

What's the solution?

Legal education has a cost problem, but so does the entire higher ed establishment. Here is my unsolicited advice.

The leadership of the AALS needs to take a very strong public position that the trend lines plaguing higher ed need to be reversed.  This is not risky because it is so painfully obvious.  The AALS should then, in conjunction with the ABA, send a very public delegation to the Dept of Education. The delegation should be given a very simple charge:  Help the DOE

  1. Outline the systemic problems that plague higher education 
  2. Articulate the importance of sound policy to the national interest
  3. Formulate a fair and sustainable solution. 

I have faith that my legal colleagues would do a masterful job solving the problems of higher education.  And in the process, we'll discover that we have become the architects of a new system of higher ed finance that will be fair and equitable system for all stakeholders, including those employed in legal education.  That's right: act decisively to ensure a fair and equitable deal.  The only drawback is that it won't be the status quo that we'd instinctively like to preserve. 

October 25, 2015 in Blog posts worth reading, Current events, Data on legal education | Permalink | Comments (25)

Tuesday, September 22, 2015

American Bar Foundation Research Professor

AjayFor those in the academy doing interdisciplinary work in the law & society area, being a Research Professor at the American Bar Foundation (ABF)  is very close to nirvana.  Moreover, my former Indiana colleague Ajay Mehrotra is the ABF's new Director.  Based on our 12 years of working together, I can attest that Ajay would be an outstanding mentor and boss, albeit this description also describes his predecessor, Bob Nelson.  The ABF is just a great place to do potentially high impact research. 

Below is the official announcement for an ABF Research Professor opening. These positions come open only rarely

American Bar Foundation Research Professor

Pending budgetary approval, the American Bar Foundation (ABF) invites applications to join its Residential Faculty as a Research Professor. Beginning in the 2016-17 academic year, the position is an ongoing one, subject to periodic performance reviews.

We seek earlier-stage candidates with a PhD and/or JD with the potential for exemplary scholarship in law and the social sciences. Research area, discipline, and methodology are open. The ABF is strongly committed to diversity in hiring.

The ABF is an independent, scholarly research institute committed to social science research on law, legal institutions, and legal processes. Its faculty consists of leading scholars in the fields of law, sociology, psychology, political science, economics, history, and anthropology.

Research professors work independently. They are responsible for identifying appropriate topics for research, seeking external funding when possible, conducting research, and authoring books and articles to be published in scholarly journals.

The ABF offers competitive salary and benefits along with research support. If jointly appointed with law or social science faculties of Chicago-area institutions, the ABF works closely with these institutions to coordinate on matters such as salary, benefits, and other work arrangements.

Review of applications will begin on November 15, 2015. We ask that applicants submit a letter of application, a curriculum vitae, a writing sample, a brief (no more than 2-page) description of current research and plans for future research, and a list of three references.

Application letters should be addressed to Ajay K. Mehrotra, Director, and sent in electronic form to Erin Watt, Executive Assistant, at facultysearch@abfn.org with the subject line “Faculty Search.” Queries about the application process can be directed to Ms. Watt at (312) 988-6582.

The American Bar Foundation encourages diversity in its workforce and seeks to provide equality of opportunity for all applicants and employees. All persons are considered for positions on the basis of job-related requirements. All decisions regarding recruiting, hiring, promotion, assignment, training, termination, and other terms and conditions of employment will be made without unlawful discrimination on the basis of race, color, national origin, ancestry, sex, sexual orientation, gender identity or expression, religion, age, disability, veteran status, pregnancy, or marital status, in accordance with the ABF’s commitment to equal opportunity and all governing laws.

September 22, 2015 in Current events, New and Noteworthy | Permalink | Comments (0)

Wednesday, September 16, 2015

In India, Big 4 and Elite Law Firms in Direct Competition for Highly Lucrative Advisory Work

Lawyers may have a monopoly over the practice of law, but what exactly does the practice of law encompass?  In most common law jurisdictions, the term is not even defined.  And there's likely a self-interested reason why.  Ambiguity produces uncertainty, and uncertainty is a major source of business risk.

In the face of significant uncertainty, why would investors fund a business that encroaches on lawyers' most lucrative work when they'll have to hire a battalion of lawyers to defeat the entire universe of lawyers in front of a judge who used to be a practicing lawyer (and may be one again)? Many lawyers would get rich losing this case for you.

Well, ambiguity may not be enough to permanently fend off the invasion.  There is a controversy taking shape in India that may foreshadow the end of the lawyer guild.  Under India's Advocates Act, only lawyers can own a law firm. Likewise, only chartered accountants can audit companies.  But what about advisory services related to business?  That's a area of tremendous potential overlap between these two professions.

Times-of-india-logoGlobally, the Big 4 have been making inroads on lucrative cross-border deal work -- not enough to mortally threaten the major law firms, but enough to get their attention.  Yet, according to this story in the The Economics Times (the leading business paper in India), it's the elite law firms putting the hurt on the Big 4, poaching talent in some of the Big 4's most lucrative practice areas.  Here's how the Indian journalists tell it:

MUMBAI: Two months after the Delhi Bar Council sent a legal notice to top professional services firms EY, KPMG, PwC and Deloitte, the simmering hostility between the Big 4 and the legal fraternity is increasingly coming out in the open.

Earlier this month, Zia Mody's AZB & Partners [the Wachtell Lipton of India] scooped up six forensic experts from EY, a move that has been seen by industry players as part of growing competition between leading law firms and consultancies for business, encroaching into each other's traditional bastions. ...

[Zia Mody, the managing partner of AZB, commented,] "The compliance and investigation practice that we have formalised would help us in due diligence, Indian anti-corruption law investigations, asset-recovery cases, private equity-related post investment investigations and in some anti-trust investigation cases."

Top legal firms in the country are diversifying into forensic operations and undertaking commercial diligence and investigations for their clients.

This comes at a time when consultancies like EY and KPMG are bulking up their teams beyond the traditional forte of audit and tax practices to expand into advisory services. ... 

"What law firms are doing is part of their evolution into full service providers," said Lalit Bhasin, president of the Society of Indian Law Firms, which in July filed a complaint against the Big 4 with the Bar Association of India, saying that they were practicing law without authorisation.

Side note on Lalit Bhasin -- he is the most prominent spokesperson for keeping in place the longstanding prohibition against foreign law firms operating inside India.  He is obviously not too keen on Big 4 accounting firms getting into his business.  The Times quotes a senior partner of a Big 4 firm, speaking on a condition of anonymity,

"The genesis of the problem is: lawyers are a close-knit community and if you don't belong to that club, you don't get lucrative work.  ... Now, the consultancies are increasingly getting their foot in the door, and doing the work at much lower price for which the lawyers would charge a bomb."

The story notes that the law firms and accounting firm are now competing to their mutual detriment, albeit the clients are unlikely complaining:

Consultancies and law firms are competing with each other in several other areas as well, and this is hurting the bottom lines of both sides as undercutting of fees has become rampant. "They (consultants) do an investment banking deal for a mere Rs 5 lakh [~$8000 US], for which a good law firm would charge around Rs 60 lakh [$90,000 US]," said the managing partner of a New Delhi-based big law firm.

Forensic is one of the most profitable business verticals for the Big 4. The total pie for forensics in India is estimated to be around .`850 crore [~$160 million] and is growing at 15-20 per cent year on year, industry experts said. Competition from lawyers, therefore, hurts the big auditors who among themselves control about 80 per cent of the market in India. Smaller rivals such as Alvarez & Marsal, FTI and Kroll [two US-based companies] control the rest.

Suffice it to say, the Big 4 aren't afraid to fight the elite bar in virtually any jurisdiction, as they have deep pockets and a large number of lawyers on their payroll, all of whom, we can be quite sure, are not engaged in the practice of law, whatever that term means.  

This is the beginning of the end of an era, and that's a good thing.  We lawyers/legal professionals will reinvent ourselves by finding new ways to add value.  In fact, that is already happening.  In the long run, we'll feel richer for it. Below is an infographic from The Times story that summarizes the Indian lawyer-accountant standoff.

Indialawyersaccountants

September 16, 2015 in Cross industry comparisons, Current events, New and Noteworthy, Structural change | Permalink | Comments (0)

Tuesday, September 1, 2015

What's driving the demographic gap between BigLaw leaders and their CEO/GC clients?

Picture1Las Vegas, NV.  The illustration to the left was just published in The American Lawyer.  It accompanied a story on how law firm leaders are significantly older than leaders in the large corporations they serve. See MP McQueen, The Generation Gap:  BigLaw's Aging Leaders, Aug 24, 2015. 

At least for me, this is a jarring graphic because it conveys so much truth.  Today's Millennials are so underwhelmed with the BigLaw model.  They like the pay and the perks, as it enables them to live well in attractive large market cities.  They can also quickly pay off their law school debt.  But precious few of them are all in. Illustrator James Steinberg totally nailed it.

There are numerous reasons for the culture divide, but as shown in the chart below, the most obvious is a very large age gap between leaders and entry-level workers -- it tends to be a lot larger in BigLaw than almost anywhere else: 4% of AmLaw 100 leaders are Gen X compared to 33% of NASDAQ-traded companies. 

HowOld-Chart
These data beg the question, why are large law firms so out-of-sync with the institutions they serve?

One reason is certainly the ownership structure.  Any Fortune 500 or NASDAQ-traded company that got this top-heavy in its senior management would be getting killed on its stock price.  Under the Rule 5.4 prohibition on nonlawyer investors, law firms are spared the anxiety of having analysts and short sellers constantly evaluating their business. Yet, the absence of a public market means that law firm owners and managers cannot fully monetize the enterprise value they create. So what's the effect?  Very little enterprise value gets created.  Instead, lawyer/owners  focus on maximizing this year's net distributable income.

It is important to not knock the BigLaw model too hard.  For about a century, it worked extremely well, as US law firms steadily grew with their clients.  Each unit of economic growth produced some larger unit increase in legal complexity, so demand for sophisticated legal services was a steady upward sloping line. By following a simple model -- hire more associates, promote some to partners, lease more office space, repeat -- equity partners in the AmLaw 100 became millionaires.  

Today, BigLaw is getting grayer because the 100-year old gold factory is breaking down. Law firms' portion of corporate legal spending is no longer growing, as in-house lawyers, NewLaw managed services shops (United Lex, Axiom, Counsel on Call), and technology are all curbing demand for traditional law firm services.   The best economic play for 55- or 60-year old equity partner is to ride out the existing model with the dwindling but still substantial number of Baby Boomer senior in-house lawyers who are themselves not too anxious to change.  

This is not the story equity partners tell themselves; it's the logic that underlies the inertial path.  It's where we end up when we are no longer deeply invested in the places we work.  It's become a job.  I am not judging here; I'm describing what I have observed through hundreds of conversations with large firm partners.

The result of this dynamic is that a large proportion of BigLaw--but certainly not all of it--is just tinkering at the margins of change. A law firm can become more cost-effective for clients, at least in the short to medium term, by reducing reliance on associates.  Associates are expensive and are, by definition, getting paid to learn.  For the last 15-20 years, firms have shifted their leverage model to counsel, staff attorneys and nonequity partners, where (a) there is little to no training, (b) the margins are higher, and (c) the clients can't complain about inefficient associates. This is the Diamond Model, which substantially cuts out the entry-level lawyer.  See The Diamond Law Firm: A New Model or the Pyramid Unraveling? (Dec. 2013); Sea Change in the Legal Market, NALP Bulletin, Aug. 2013.

Pyramid_Diamond

Unlike the original Pyramid Model, invented by Paul Cravath circa 1910, the Diamond Model is not a carefully conceived business strategy. Rather, it's a way to maximize this year's and next year's net distributable income without making difficult strategic tradeoffs. Yet, in the longer term, which is no longer too far off, the Diamond Model is a disaster.  The few associates who make it into large firms are grateful for the high pay and the training.  But very few if any are impressed with the business model.  Among Millennial lawyers, in-house is the new brass ring.

Law firms are filled with brilliant people. Why are they going down this road?  Three interrelated reasons:

  1. Lack of Experience. Today's law firm partners have little or no experience with strategy--for a hundred years, intelligence and hard work worked just fine.  This is not a change in strategy--it is having a strategy.  Then executing.  That's hard.
  2. Incentive Structures. Virtually all incentives inside firms today favor revenue generation; as a result, few partners have the mental whitespace to understand, much less think through, the changes that are occurring within the broader industry.  To fix the bridge, you have to slow down the traffic.
  3. To Big to Fix.  The first strategy mistake for the current generation of AmLaw 100 leaders was to become bigger without becoming measurably better.  Big firms filled with laterals is a difficult environment to share risk. Maximizing this year's distributable income becomes one of the few things people can agree on.

That said, I am not counting BigLaw out.  I am writing this blog post from the International Legal Technology Association (ILTA) conference in Las Vegas.  From far away, it is all too easy to treat BigLaw as a monolith--it's not.  At ILTA, professionals from several of the most innovative law firms are willing to pop the hood and share what they doing.  See Ahead of the Curve: Three Big Innovators in BigLaw, Aug. 25, 2014Suffice it to say, some firms are several years into strategies that have the potential to take market share from peer firms.  Further, the innovation teams inside these firms are having the time of their professional lives because the work is so collaborative and creative--the antithesis of billable hour work.  What is also clear is that many competitors just can't muster the leadership nerve to make similar investments. 

In the years to come, some BigLaw firms are going to pull away from the rest, becoming a magnet for talent and then clients.  Younger lawyers are going to thrive there.  Another portion of BigLaw is going to gradually fade away. 

September 1, 2015 in Current events, Data on the profession, Law Firms, Structural change | Permalink | Comments (3)

Thursday, August 6, 2015

How is the entry-level legal job market in Australia?

AlsaNot good.  There are more law graduates than jobs, yet law schools are making matters worse by admitting more students in order to generate subsidies for other parts of the university. That the basic charge of the Australian Law Students Association (ALSA), according to this story in the Lawyers Weekly, a publication that covers the business of law in Australia.

Legal education is Australia is very different than the U.S.,  yet the dynamics of the two entry-level markets seem to be converging.  Law has historically been an undergraduate degree in Australia (LLB), but in recent years the JD has been added as a new and more prestigious way into the profession. Here is the statement of an ALSA spokesperson based on recent survey results of the ALSA membership.

ALSA are of the position that there is still an oversupply of graduates because of the increasing sizes of law schools and the duplication in the number of law schools across the country. ...

Many who have undertaken the Juris Doctor particularly expressed concerns in their survey responses, highlighting that they undertook the postgraduate law degree to further their job prospects. Instead, they are facing the worrying reality that there are fewer jobs available for law graduates as well as the fact that they are completing their degrees with a sizeable student debt.

The article then goes on to describe growing law student anxiety over employment and student loan debt.  Wow, different system but a very similar result.  

One of the advantages of the Australian LLB degree is that it is often combined with another undergraduate degree, typically by adding one year of additional study.  As a result, many LLBs don't go on to qualify for practice, but the legal training probably augments their worldly knowledge and critical thinking skills.  But alas, the Australians are starting to dilute their extremely generous higher education subsidies -- we are just much further down that road. Further, the true undercurrent here is the growing insecurity facing virtually all knowledge workers, Australian or US.  Legal education is just the bleeding edge of this problem.

August 6, 2015 in Current events, Data on legal education, Data on the profession, New and Noteworthy | Permalink | Comments (0)

Tuesday, August 4, 2015

Metrics and Legal Ops Professionals

In a recent post, I urged readers to visit a legal department with a large legal operations staff.   The goal?  To see the future of modern corporate law practice.  Fortunately, Bloomberg Law recently videotaped a legal ops panel moderated by Amar Sarwal of the ACC.  It contains a conversation rarely if ever heard in law schools or bar associations.

The three legal departments profiled are AIG (insurance), Marsh & McLennan (diversified financial and professional services), and GlaxoSmithKline (pharma).  Note the enormous emphasis on metrics, data, and technology.  Note also how the services of law firms are being put through a procurement process. 

August 4, 2015 in Blog posts worth reading, Current events, Data on the profession, Law Firms, Legal Departments, New and Noteworthy, Video interviews | Permalink | Comments (0)

Saturday, August 1, 2015

Legal Analytics to Build Substantive Legal Strategy

RavellexmachinaLex Machina and Ravel Law are two start-ups in the legal analytics space (I call companies like this "toolmakers"). Per an invite that arrived in my email yesterday, these Lex Machina and Ravel are collaborating on an upcoming webinar that shows lawyers how to use legal analytics to build a substantive legal strategy.  And not just any strategy, but one more likely to win.

Is this smoke and mirrors or the real deal? That remains an open empirical question.  But it's worth noting the venture capitalists who backed these companies are betting on the proposition that humans + machines > humans or machine. (This is Dan Katz's formulation.) For lawyers interested in staying current on the legal market (most of us, right?), it's likely worth attending.   Sure, Lex Machina and Ravel will be hawking their own products, but hey, educating your prospective clients is how one builds a market for complex technical products.  This skill will eventually be taught in law schools -- at least the good ones.  It is worth noting that both Lex Machina and Ravel trace their origins back to Stanford Law.  

Here is the essential information on the webinar.

How can you employ Legal Analytics in your practice to get clients and win cases?

New legal technologies are transforming the practice of law by enabling lawyers to uncover trends in the behavior of judges, parties, law firms and attorneys.

Ravel Law's case law analytics and Lex Machina's IP docket analytics enable lawyers to make data-driven decisions about case strategy and tactics.

Click here to register for a live 45-minute webinar on Thursday, August 6th at 11:00 am PT.

Host: Ralph Baxter, Advisor, Writer, and Speaker, Former Chair, Orrick 

Speakers: Owen Byrd, Chief Evangelist & General Counsel, Lex Machina & Daniel Lewis, CEO & Co-Founder, Ravel Law

Related posts:

August 1, 2015 in Current events, Innovations in law, New and Noteworthy | Permalink | Comments (0)

Wednesday, July 29, 2015

"Solicitors 'in denial' about threat from accountants"

Legalservices (321x207)That's the headline from today's Law Society Gazette, the publication of record for solicitors in England and Wales.  The UK is fairly far along in liberalization of its legal markets, progressing from the Clementi Report in 2004 to the Legal Services Act 2007 to the licensing of Alternative Business Structures in 2012.  Now several hundred entities have obtained ABS status.  

The Gazette article reports that accountants are poised to be large players in the ABA space:

Accountants will soon be competing directly with solicitor firms ‘on every high street in the country’, according to a leading financial advisor to the legal sector.

Ian Muirhead, chairman of Solicitors Independent Financial Advice, said he expects 750 accountancy firms – three times more than first envisaged – to move into probate work after securing an alternative business structure licence.

The Institute of Chartered Accountants in England & Wales has accredited 113 entities as an ABS since last October, having been accepted as an approved regulator almost a year ago. A further 34 applications are being processed.

Speaking at a Westminster Legal Policy, Muirhead said too many solicitor firms are ‘in denial’ about the threat from the accountancy profession.

‘Success will go to those who can manage businesses and I query whether that’s going to be the solicitors or whether solicitors are going to be the back room boys,’ he said.

Muirhead argued that law firms’ response so far has been focused on consolidation, mergers and acquisitions – but this risks playing into rivals’ hands.

‘[The response is] safety in numbers, more of the same, not thinking outside the legal silo, and therefore missing the opportunity of which many new ABSs are availing themselves, of providing a more diversified and holistic client service,’ he added. ... 

Some U.S. lawyers believe that liberalization won't come to the U.S. because the legal industry is too balkanized by state bar authorities.  

I think this view, however, is likely naive. The market can change because regulators change the rules (the UK). Alternatively, the market can change because clients change their buying habits in favor of nontraditional legal service providers that are financed by sophisticated nonlawyer investors (the US).  See, e.g., Is Axiom the Bellwether for Disruption in the Legal Industry, LWB, Nov. 10, 2013.

In the US, it is probably true that regulators lack the stomach to initiate a regulatory action where the client ostensibly being protected is a Fortune 500 corporation.  If the action ends up in federal court, the bar officials risk looking like protectors of the guild and have a decent chance of losing.  The prohibition against nonlawyer investment (MR 5.4) is based on the assumption that the nonlawyer profit motive will compromise lawyer independence, thus harming the unwitting and unsophisticated legal consumer.  But that does not describe IBM's or JP Morgan's relationships with sophisticated LPO or analytics shop (or any general counsel charged with stretching his or her legal dollar). As a result, the venture capital money flows in.

When liberalization is viewed in this light, there are probably more similarities between the US and UK than we might want to acknowledge. 

July 29, 2015 in Current events, Data on the profession, Innovations in law, Law Firms, New and Noteworthy, Structural change | Permalink | Comments (2)

Thursday, May 14, 2015

Further Thoughts on the July 2014 Bar Results -- A Response to Erica Moeser

Late last fall, Erica Moeser responded to a letter from Dean Kathryn Rand of the University of North Dakota (on behalf of a large number of law school deans), reiterating that the NCBE had double-checked its scoring of the MBE on the July 2014 bar examination and could find no errors in its calculations.  Erica Moeser also took to the pages of the December 2014 issue of The Bar Examiner to further validate her conclusion that the historic drop in the mean MBE scaled score is attributable solely to the fact that the class that sat for the July 2014 bar exam was “less able” than the class that sat for the July 2013 bar exam.  In January, Dean Stephen Ferruolo of the University of San Diego also wrote to Erica Moeser requesting the release of more information on which to assess the July 2014 bar examination results in comparison with previous years’ results.  In February, Erica Moeser responded to Dean Ferruolo’s request by declining to provide more detailed information and reiterating her belief that the July 2014 scores “represent the first phase of results reflecting the dramatic and continuing downturn in law school applications.”

In an earlier blog posting, I explained why Erica Moeser is partly right (that the Class of 2014 could be understood to be slightly less able than the Class of 2013), but also explained why the decline in “quality” of the Class of 2014 does not explain the historic drop in mean MBE scaled score.  The decline in “quality” between the Class of 2013 and the Class of 2014 was modest, not historic, and would suggest that the decline in the mean MBE scaled score also should have been modest, rather than historic.  Similar declines in “quality” in the 2000s resulted in only modest declines in the MBE, suggesting that more was going on with the July 2014 exam. 

Others have written about these issues as well.  In January, Vikram Amar had a thoughtful reflection on Moeser’s statements and in recent weeks Debby Merritt has written a series of posts -- here, here, and here -- indicating in some detail why she believes, as I do, that the ExamSoft debacle in July could have impacted the MBE scaled scores in jurisdictions that used ExamSoft as well as in other jurisdictions.

I write now to take issue with four statements from Erica Moeser – three from her President’s Page in the December 2014 issue of the Bar Examiner and one from her letter responding to Dean Kathryn Rand.  I remain unpersuaded that the historic decline in the mean MBE scaled score is solely attributable to a decline in quality of the class that sat for the July 2014 bar examination and remain baffled that the NCBE refuses to acknowledge the possibility that issues with test administration may have exacerbated the decline in the performance on the July 2014 MBE.

Item One – Differential Declines in MBE Scores

In her December article, Moeser stated: 

I then looked to two areas for further corrobo­ration. The first was internal to NCBE. Among the things I learned was that whereas the scores of those we know to be retaking the MBE dropped by 1.7 points, the score drop for those we believe to be first-time takers dropped by 2.7 points. (19% of July 2014 test takers were repeaters, and 65% were believed to be first-time takers. The remaining 16% could not be tracked because they tested in jurisdictions that col­lect inadequate data on the MBE answer sheets.) The decline for retakers was not atypical; however, the decline for first-time takers was without precedent dur­ing the previous 10 years. (Emphasis in original.)

Moeser starts by referencing data that is not publicly available to support her cause.  This is unfortunate, because it makes it really hard to understand and critique the data.  Nevertheless, there are some inferences we can take from what she does disclose and some questions we can ask.  Moeser asserts that the 19% of MBE “retakers” saw an MBE drop of 1.7 points compared with MBE “retakers” in July 2013, while the 65% believed to be first-time takers saw a drop of 2.7 points compared with first-time takers in July 2013.  It would have been helpful here if Erica Moeser would have released publicly the declines among MBE retakers in the previous 10 years and the declines among first-time takers in the previous 10 years so that patterns could be assessed, particularly in relation to the changes in class composition for each of those years.  Without that information available it is hard to do much more with Moeser’s assertion.  (I find it odd that she would reference this point without providing the underlying data.) 

Nonetheless, this assertion raises other questions.  First, the overall decline in the mean MBE scaled score was 2.8 points. Moeser notes that 19% of takers (MBE retakers) had an average drop of 1.7 points, while 65% of takers (first-time takers) had an average drop of 2.7 points.  Unless there is something I am missing here, that should mean the remaining 16% of test-takers had to have an average decline of 4.51 points!  (This 16% of test-takers represents those who Moeser notes could not be tracked as first-time takers or MBE retakers “because they tested in jurisdictions that collect inadequate data on the MBE answer sheets.”) (Here is the equation --- 2.8 = (.19*1.7)+(.65*2.7)+(.16*x).  Solve for X. This translates to 2.8 = .323+1.755+.16x.  This translates to .722 = .16x and then .722/.16 = X.  X then equals 4.51.)  It would have helped, again, if Moeser had indicated which jurisdictions had these even larger declines in mean MBE scaled scores, as we could then look at the composition of graduates taking the bar in those jurisdictions to see if there was an unusual decline in entering class statistics in 2011 at the law schools from which most bar takers in those states graduated.

Item Two – The MPRE

In the December article, Moeser also stated:

I also looked at what the results from the Multistate Professional Responsibility Examination (MPRE), separately administered three times each year, might tell me. The decline in MPRE performance supports what we saw in the July 2014 MBE numbers. In 2012, 66,499 candidates generated a mean score of 97.57 (on a 50–150 scale). In 2013, 62,674 candidates generated a mean score of 95.65. In 2014, a total of 60,546 candi­dates generated a mean score of 93.57. Because many MPRE test takers are still enrolled in law school when they test, these scores can be seen as presaging MBE performance in 2014 and 2015.

At first blush, this looks like a pretty compelling argument, but Moeser’s selectiveness in looking at the data is troubling, and her failure to discuss whether the MPRE and MBE are meaningfully comparable test-taking experiences also is troubling.  Essentially, Moeser is making the following assertion – because the mean MPRE scaled score declined by 1.92 points between 2012 and 2013, we should have expected a large decline in the mean MBE scaled score in July 2014 (and because the mean MPRE scaled score declined another 2.08 points between 2013 and 2014, we should expect another large decline in the mean MBE scaled score in July 2015).

But the “relationship” between changes in the mean MPRE scaled score and changes in the mean MBE scaled score over the last decade does not support this assertion. If one looks at a decade’s worth of data, rather than data just for the last couple of years, the picture looks significantly more complicated, and suggests the collective performance on the MPRE may not tell us much at all about likely collective performance on the MBE in the following year. 

MPRE Year

Mean MPRE Score

Change

MBE Year

July Mean MBE Scaled Score

Change

2004

99.1

 

2005

141.6

 

2005

98.7

-0.4

2006

143.3

+1.7

2006

98

-0.7

2007

143.7

+0.4

2007

98.6

+0.6

2008

145.6

+1.9

2008

97.6

-1.0

2009

144.5

-1.1

2009

97.4

-0.2

2010

143.6

-.9

2010

96.8

-0.6

2011

143.8

+0.2

2011

95.7

-1.1

2012

143.4

-0.4

2012

97.6

+1.9

2013

144.3

+0.9

2013

95.6

-2.0

2014

141.5

-2.8

2014

93.6

-2.0

2015

????

????

The data Moeser cites from the last two years conveniently makes her point, but it consists of a very small sample size.  The data over the last decade looks much more random.  In three of the nine years, the change is not in the same direction (MPRE 2005, 2006, 2010, MBE 2006, 2007, 2011).  In the six years where the change is in the same direction, there are two years in which the MBE change is significantly larger than the MPRE change (MPRE 2007, 2009, MBE 2008, 2010) and there are two years in which the MBE change is significantly smaller than the MBE change (MPRE 2011, 2012, MBE 2012, 2013).  In only two of the nine years, do the changes in the MPRE and MBE roughly approximate each other (MPRE 2008, 2013, MBE 2009, 2014).   Nonetheless, this remains a very small sample and more analysis of data over a longer period might be helpful to better understand how/whether changes in mean MPRE scores inform meaningfully changes in mean MBE scores the following year.  At this point, I think the predictive value seems marginal given the wide range of changes on a year-over-year basis.

Item Three – Mean LSAT Scores

In the December article, Moeser further stated:

Specifically, I looked at what happened to the overall mean LSAT score as reported by the Law School Admission Council for the first-year matricu­lants between 2010 (the class of 2013) and 2011 (the class of 2014). The reported mean dropped a modest amount for those completing the first year (from 157.7 to 157.4). What is unknown is the extent to which the effect of a change to reporting LSAT scores (from the average of all scores to the highest score earned) has offset what would otherwise have been a greater drop. (LSAC Research Reports indicate that roughly 30% of LSAT takers are repeaters and that this num­ber has increased in recent years.

This assertion is misguided for purposes of this comparison, a point Vikram Amar made in his post.  If we were comparing the first-year matriculants in 2009 with the first-year matriculants in 2010, the question of the change in reporting from average LSAT score to highest LSAT score would have mattered.  But the 2010 matriculants were the first class for which the mean was reported based on highest LSAT score and the 2011 matriculants were the second class for which the mean was reported based on highest LSAT score.  Thus, there is no “unknown” here.  The reported mean LSAT dropped only a modest amount between the matriculants in 2010 and the matriculants in 2011.  Nonetheless, the mean MBE scaled score in July 2014 decreased by an historic 2.8 points from the mean MBE scaled score in July 2013. 

Item Four – Administration Issues

In her letter to Dean Kathryn Rand, Moeser stated:  "To the extent that the statement you attached referenced both administration and scoring of the July 2014, bar examination, note that NCBE does not administer the exam; jurisdictions do."

This response suggests not only that the NCBE is not responsible for administering the bar examinations in the many different jurisdictions, but implicitly suggests that issues with administration could not have contributed to the historic decline in the mean MBE scaled score. 

Were there issues with administration?  Yes.   Could they have contributed to the historic decline in the mean MBE scaled score?  Yes.

Debby Merritt’s recent posts discuss the administration issues and the potential consequences of the administration issues in some detail.  In over forty states that used ExamSoft to administer the bar examination, the MBE came on Wednesday, after the essay portion of the exam on Tuesday.  But because of an ExamSoft technical problem, tens of thousands of test-takers, who were initially informed by their respective state board of bar examiners that they would FAIL THE EXAM if their essay answers were not uploaded in a timely manner, spent most of Tuesday night dealing with the profound stress of not being able to upload their exam answers and not being able to contact anyone at the board of bar examiners (who were not answering phones) or at ExamSoft (due to the flood of calls and emails from anxious, frustrated, stressed out exam takers) to figure out what was going on and what they should do. 

Given that this “administration” issue caused untold stress and anxiety for thousands of test-takers, who spent Tuesday night completely anxious and stressed out trying repeatedly and unsuccessfully to upload their essay answers, should it be a surprise that they might have underperformed somewhat on the MBE on Wednesday?  (If you want a sense of the stress and anxiety, check the twitter feed for the evening of Tuesday, July 29, 2014)

The responses from the boards of bar examiners to this issue with administration of the bar examination were far from uniform.  Different jurisdictions granted extensions at different times of the night on Tuesday, July 29, or on Wednesday, July 30, with some granting short extensions and some granting longer extensions.  Thus, in states that gave notice of an extension out earlier on Tuesday, July 29, test-takers may have had less stress and anxiety, while in those states that didn’t give notice of an extension out until later (or for which the extension was relatively short), or where there may not have been any communication regarding extensions of the submission deadline, test takers likely experienced more stress and anxiety.  (It would be worth studying exactly when each jurisdiction gave notice of an extension and whether there is any correlation between timing of notice of the extension and the relative performance of bar takers in those states.)

The NCBE’s unwillingness to acknowledge any issues with administration of the bar examination is all the more surprising at a time when the NCBE is pushing for adoption of the Uniform Bar Examination.  On its webpage, the NCBE states: “[The UBE] is uniformly administered, graded, and scored by user jurisdictions and results in a portable score that can be transferred to other UBE jurisdictions.” (Emphasis added.)  This simply was not true in July 2014.  The Uniform Bar Examination was administered under different exam conditions across jurisdictions.  First, three of the states administering the Uniform Bar Examination in July 2014 did not use ExamSoft – Arizona, Nebraska and Wyoming -- and therefore, bar takers in those states had a vastly different “exam administration” experience than bar takers in ExamSoft jurisdictions.  Across ExamSoft jurisdictions, different approaches to extensions also meant different administration experiences. Given the significance of consistent administration for the purpose of equating performance on a standardized exam like the bar exam, that the NCBE allows such varied approaches to administering a supposedly “uniform” exam strikes me as very problematic.

Many questions remain unanswered, largely because adequate information has not been made available on which to assess the various factors that might have contributed to the historic decline in the mean MBE scaled score.  With the release of February bar results and the NCBE’s publication of the 2014 statistical report, some additional information is now available to put the results of July 2014 in context.  In my next blog posting regarding the July 2014 bar results, I will delve into some of those statistics to see what they tell us.

(Edited as of May 20 to correct the 2013 MPRE and 2014 MBE change and corresponding discussion.)

May 14, 2015 in Current events, Data on legal education, Data on the profession | Permalink | Comments (0)

Sunday, April 12, 2015

Another Example of Using Big Data to Improve Odds of Winning in Court

Back in February, I wrote a post on The The Early Days of Legal Analytics.  It discussed some of the innovations at Lex Machina, a legal start-up that uses Big Data to value contested patents and develop a litigation strategy designed to maximize value / minimize risk.  I recently came across another company, Premonition, that claims to use artificial intelligence to select lawyers with the best odds of achieving a favorable result. See Premonition Infographic at bottom of this post.

I spend a lot of time on the road talking to law firm lawyers and legal innovators, including legal start-ups.  Many large firm lawyers tend to dismiss new innovations without stopping to listen to, much less gather, relevant facts.  Likewise, there is a lot of puffery among legal start-ups as they try to land their first few customers.  Thus, I tend to apply a windage factor to accurately interpret what I am being told.

The image below contains Premonition's simple, one-sentence pitch.  I don't know about the product, but the concept is pretty clear.

Premonition

The core benefit Premonition appears to offer is a list of lawyers with winning track records in front of specific judges. We don't need artificial intelligence (AI) to make that calculation.  A win-rate is a simple descriptive statistic, even if it has been filtered for a variety of matching criteria.

That said, AI could come in handy in building the requisite data sets.  As explained on Premonition's website, courts don't construct their case management systems so they can be vacuumed out by data mining companies. Indeed, local court officials would likely to be hostile to such requests because any resulting statistical model is unlikely to make them look good.  Indeed, the purpose of the model is, at least in part, to identify and exploit imperfections in the judicial process.  

Because the courts have no incentive to make life easy for Big Data vendors, Premonition's Chief Innovation Officer, Toby Unwin, claims to have tackled the data assembly problem by building a technology that scrapes and buckets the necessary data from the jumbled chaos of web portals for state and local courts.  Such a task, in theory, can be performed by fairly standard machine learning, which qualifies as AI, at least in some circles.  

Assuming Premonition has built a machine that can calculate win-rate of lawyers, is that information valuable to clients trying to maximize the likelihood of a favorable result?  I don't know, but its plausible enough to test with data.

Some data skeptics will argue that win-rates, whether high or low, are just artifacts of any normally distributed outcome.  The reasoning runs, "Two, three, and four sigma events occur in the ordinary course of life, but regression to the mean is pulling them back to the center. Thus, they are poor predictors of the future."  This reasoning is why many people buy indexed funds rather than shares in actively managed mutual funds.  Cutting the other way, the hedge fund industry is premised on the belief that some money managers are a lot better than others. Five-year return rates are aggregated and published in the industry trade press.  Some of the returns may be due to random luck, but some could be attributed to superior skill.  It is absurdly unlikely, for example, that Warren Buffet's success in buying and selling stocks is just a 60-year lucky streak.

In the case of win-rates in court, I can think of at least two plausible non-random factors that could affect outcomes:

  1. Judicial bias or favoritism.  Judges, either consciously or unconsciously, may react differently to the case depending upon the advocate.  One does not have to wade too far into the political science literature to find peer-reviewed empirical studies that reveal that judges are influenced by more than just facts and law. 
  2. The gap between credentials and bona fide skill.  Law has historically been a credence good.  This means the market relies on elite credentials and firm reputation as a proxy for skill.  Yet, it is plausible that some lawyers may lack the pedigree to get hired by large, elite law firms, yet they go on to develop outstanding legal skills, perhaps because of superior drive, intellectual curiosity, or "early at-bats" as a prosecutor or public defender. If these folks exist, Big Data can likely find them.

I can't vouch for Premontion's technology beyond two statements: (1) it sounds plausible, and (2) it is a waste of time to debate its usefulness because it's an empirical question that the market will answer in the relatively near term.  

Below is one of Premonition's infographics.

Infographic-Everything-You-Know-About-Lawyer-Selection-Is-Wrong

 

April 12, 2015 in Cross industry comparisons, Current events, Innovations in law, New and Noteworthy | Permalink | Comments (1)

Wednesday, March 18, 2015

Igniting Law Teaching Conference

IgnitingLawTeaching
Registration is now open for LegalED’s Igniting Law Teaching 2015.  The conference is Friday, March 20, 2015 from 9:00 am – 5:00 pm EST at American University Washington College of Law.  It is also available for live viewing by webcast.

The conference will feature talks by 30 law school academics and practitioners from the US, Canada and England in a TEDx-styled conference to share ideas on teaching methodologies.  LegalED’s Teaching Pedagogy video collection includes many of the talks from last year’s conference, which have been viewed collectively more than 5000 times.  The panels for this year include:

  • Law Teaching for the 21st Century
  • Applying Learning Theory to Legal Education
  • The Art and Craft of Law Teaching
  • Using Technological Tools for Legal Education, and Pathways to Practice. 

Here is a link to the topics, speakers and schedule.

 The Igniting Law Teaching conference is unlike other gatherings of law professors.  Here, talks will be styled as TEDx Talks, with each speaker on stage alone, giving a well scripted and performed 8 minute talk about an aspect of law school pedagogy.  In the end, we will create a collection of short videos on law school-related pedagogy that will inspire innovation and experimentation by law professors around the country, and the world, to bring more active learning and practical skills training into the law school curriculum.  The videos will be available for viewing by the larger academic community on LegalED, a website developed by a community of law professors interested in using online technologies to facilitate more active, problem-based learning in the classroom, in addition to better assessment and feedback.

 Readers are encouraged to attend the March 20th conference, either live or virtually

[HT: the tireless and thoughtful Michele Pistone of Villanova Law]

March 18, 2015 in Current events, Fun and Learning in the classroom | Permalink | Comments (0)

Saturday, February 7, 2015

The Early Days of Legal Analytics

LexMachina-logo1There is an interesting story in Forbes on Lex Machina, a legal start-up that provides analytics for use in patent litigation.  See Dan Fisher, Stanford-Bred Startup Uses Moneyball Stats to Handicap Judges, Forbes, Feb. 2, 2015.  The company was created by faculty at Stanford Computer Science and Stanford Law.  As the company emerged from the University, the reigns were handed to Josh Becker, a Stanford JD-MBA.  To date, the company has raised $8 million in start-up funding.  According to the Forbes article, the company's clients include some of the nation's large technology companies plus one-third of the AmLaw 100.

What makes Lex Machina so interesting is that the company is not a NewLaw service provider that trying to take marketshare. Instead, Lex Machina is a toolmaker.  It is a true Big Data company that provides analytics to (a) value contested patents and (b) protect/maximize that value through a litigation strategy that is informed by data.  

The impact of Lex Machina is hard to decipher, primarily because if it does provide an edge, the customers are unlikely to be too vocal. Just like a hedge fund with an effective trading strategy, why advertise the ingredients of your secret sauce? Indeed, compared to other toolmakers (e.g., predictive coding, expert systems) Lex Machina's benefits are less about efficiency and more about affecting the outcomes of cases -- who wins and by how much.  If Lex Machina is truly delivering, it will eventually touch-off a Big Data legal analytics arms race akin to the quant revolution on Wall Street.  Dan Katz frequently makes this point, and I think he is right.  The Forbes article makes the point that Lex Machina is already moving into adjacent areas of IP law and general commercial litigation.  

The broader legal industry is unlikely to notice Lex Machina until it has a substantial liquidity event -- i.e., it's acquired or goes public, making if founders far richer than the BigLaw partners and in-house lawyers they currently serve.  

If we are looking for early signs of a tipping point for legal analytics, one marker may be the number of Stanford Law grads who are turning down entry-level opportunities in BigLaw to pursue legal start-ups.  In recent years, Stanford Law grads fresh out of law school have gone on to found other venture-backed legal start-ups like Ravel Law, Judicata, and Law Gives.  Back in 2013, The Stanford Lawyer (SLS alumni magazine) had an extensive write-up with several examples.  See Sharon, Driscoll, A Positive Disruption, June 4, 2013.  In 2014, Stanford's CSO offered a program titled, An Alternative to BigLaw -- Startups.

The legal world isn't going away; it's just changing.

February 7, 2015 in Cross industry comparisons, Current events, Data on the profession, Innovations in law, New and Noteworthy, Structural change | Permalink | Comments (0)

Sunday, January 4, 2015

Size of the US Legal Market by Type of Client

Washington, DC.  The AALS Section on Professional Responsibility hosted a vigorous discussion today on the evolving ethical duty of competency, a topic partially inspired by the recent changes to Model Rule 1.1 cmt. 8 (requiring lawyers to stay abreast of the "benefits and risks associated with relevant technology").  As part of this panel, I showed a chart on the size of the US legal market, which was promptly tweeted by CALI 's Director of Community Development, Sarah Glassmeyer, a law librarian who is a total data subversive in a style and manner I fully support.

Well, despite a less-than-optimal photo angle, the chart was retweeted and favorited, so I figured I ought to just post the actual chart here. [Click on to enlarge] Legal Market

In a competitive market, the threshold question, asked by potential entrants and those who might finance them, is often the same: "what is the size of the available (or addressible) market?" Because lawyers and law schools are feeling unprecedented economic pressure, I thought it would be worthwhile to run this exercise for the U.S. legal industry and break it down by type of client.

The figures above are estimates of 2014 receipts going to organizations and individuals in the business of providing legal services.  My calculations are derived from US Census Bureau data. They exclude the cost of in-house and government lawyers.  More granular calculation details will be laid out in a forthcoming publication.

At today's AALS Professional Responsibility session, technology was framed as an ethical issue. And that is certainly right:  technology can deliver enormous cost and quality benefits to clients, so we have both a fiduciary and professional duty to be up-to-date.  Yet, there is a flip-side here that is crucially important -- to ignore or fall behind on technology is to run the risk of commercial ruin. This axiom applies to lawyers in private practice and to law schools that want employers to hire their graduates. 

Building upon that theme, I used the Market Size chart to make two points today, one based on the high-end corporate market (right side of chart) and the other directed toward the individual consumer market (left side of chart). 

Re the corporate side, the data show that a relatively small roster of large corporations are spending vast sums each year on legal services -- more than $10 million per year for a publicly held company.  Because large national and international corporations are awash in a sea of growing legal complexity, they are turning to technology, process, and data to keep legal costs in line with overall company revenues.  From the perspective of a large corporate client, the typical junior law firm associate has little to offer.  A more seasoned partner or counsel is a better value, but this is by virtue of experience rather than technology or process.  As a result, law firm hiring remains stagnant, and more legal work is being taken in-house or given to LPOs or New Law legal service providers like Axiom, Elevate, or Novus Law.  It may take a generation for the law school--law firm--legal department supply chain to come into a reasonable alignment.  Right now, it's broken.

Re the individual retail market, the $232 annual legal spend per citizen means that there is not enough money go around to pay for all the legal need.   If a middle-class professional couple with kids has a contested divorce, that could easily chew-up $50,000 to $100,000 in legal fees.  A DUI is likely to cost $1,500.  A worker's comp claim might be 30% of an award.  Probate work runs well into the thousands.  In reality, most citizens go without.  One of our co-panelists today, retired US Magistrate Judge John Facciola, made the claim that 83% of American never talk to a lawyer to help them with a legal problem.  "The middle class is largely gone from federal court."  To my mind, technology is the only vehicle for tapping into a large latent market for legal services.  LegalZoom, Rocket Lawyer, Modria, Shake, and many other legal technology companies all see the potential here. And so do the venture capital and private equity firms that are funding them. 

 Today's panel was one of the most lively I have ever attended at AALS, owing in part to my excellent co-panelists but also an audience that asked some great, tough questions.  Many thanks to Andy Perlman (Suffolk Law) for organizing a terrific session and Natasha Martin (Seattle) for her skillful moderation of the panel.

January 4, 2015 in Current events, Data on the profession, Legal Departments, New and Noteworthy, Structural change | Permalink | Comments (2)

Saturday, December 20, 2014

Further Understanding the Transfer Market -- A Look at the 2014 Transfer Data

This blog posting is designed to update my recent blog posting on transfers to incorporate some of the newly available data on the Summer 2014 transfer market.  Derek Muller also has written about some of the transfer data and I anticipate others will be doing so as well.

NUMBERS AND PERCENTAGES OF TRANSFERS – 2006-2008, 2011-2014

While the number of transfers dropped to 2187 in 2014 down from 2501 in 2013, the percentage of the previous fall’s entering class that engaged in the transfer market remained the same at roughly 5.5%, down slightly from 5.6% in 2013, but still above the percentages that prevailed from 2006-2008 and in 2011 and 2012.

 

2006

2007

2008

2011

2012

2013

2014

Number   of Transfers

2265

2324

2400

2427

2438

2501

2187

Previous   Year First Year Enrollment

48,100

48,900

49,100

52,500

48,700

44,500

39700

%   of Previous First-Year Total

4.7%

4.8%

4.9%

4.6%

5%

5.6%

5.5%

 

SOME SCHOOLS DOMINATE THE TRANSFER MARKET – 2012-2014

The following two charts list the top 20 transfer schools in Summer 2012 (fall 2011 entering class), Summer 2013 (fall 2012 entering class) and Summer 2014 (fall 2013 entering class) – with one chart based on “numbers” of transfers and the other chart based on the number of transfer students as a percentage of the prior year’s first year class.

Largest Law Schools by Number of Transfers from 2012-2014

School

Number   in 2012

School

Number   in 2013

School

Number   in 2014

Florida   State

89

Georgetown

122

Georgetown

113

Georgetown

85

George   Wash.

93

George Wash.

97

George   Wash.

63

Florida   St.

90

Arizona St.

66

Columbia

58

Emory

75

Idaho

57

Mich. State

54

Arizona   State

73

Cal. Berkeley

55

NYU

53

American

68

NYU

53

American

49

Texas

59

Emory

50

Cardozo

48

Columbia

52

Columbia

46

Loyola Marymount

46

NYU

47

American

44

Rutgers   - Camden

42

Minnesota

45

UCLA

44

Minnesota

42

Arizona

44

Wash. Univ.

44

Arizona   State

42

Northwestern

44

Texas

43

Cal. Berkeley

41

UCLA

41

Minnesota

37

Emory

41

Cardozo

38

Northwestern

35

UCLA

39

Southern   Cal.

37

Harvard

33

Northwestern

38

Utah

34

Mich. State

33

Florida

37

Harvard

34

Loyola Marymount

32

Maryland

34

Florida

33

Florida State

31

Michigan

33

Cal. Berkeley

32

Southern   Cal.

30

SMU

31

Wash Univ.

31

Miami

29

Harvard

31

 

 

 

 

 

Largest Law Schools by Transfers as Percentage of Previous First-Year Class

2012-2014 

School

% 2012

School

% 2013

School

% 2014

 

Florida St.

44.5

Florida State

48.1

Arizona State

51.6

Arizona State

24.6

Arizona State

48

Idaho

51.4

Michigan State

17.5

Utah

34.7

Washington Univ.

23.3

Utah

17.5

Emory

29.6

Emory

22.9

Minnesota

17.1

Arizona

28.9

Georgetown

20.8

Emory

16.5

Minnesota

22

George Wash.

20.2

Cal. Berkeley

16.2

George Wash.

21.8

Cal. Berkeley

19.4

Rutgers - Camden

14.9

Georgetown

21.2

Florida St.

18.2

Georgetown

14.7

Rutgers – Camden

20.7

Rutgers - Camden

17.1

Southern Cal.

14.7

Southern Cal.

19.7

Southern Cal.

17.1

Northwestern

14.4

Texas

19.1

Minnesota

16.7

Cincinnati

14.3

Cincinnati

17.5

Utah

15.9

Columbia

14.3

Northwestern

17.1

Northwestern

15.3

Buffalo

14.2

Washington Univ.

15.4

UCLA

15

Arizona

14

Univ. Washington

15.3

Seton Hall

14.5

Cardozo

13.8

Columbia

14.2

Florida Int.

13.9

SMU

13.4

American

13.8

Texas

13.5

Florida

12.7

SMU

13.3

Columbia

13.1

Chicago

12.6

UCLA

13.3

Richmond

12.8

George Wash.

12.5

Chicago

13

Univ. Washington

12.6

 

 

 

 

Houston

12.6

 

Note that in these two charts, the “repeat players” -- those schools in the top 20 for all three years -- are bolded.  In  2013 and 2014, nine of the top ten schools for number of transfers repeated.  (The notable newcomer this year is Idaho, which received 55 transfers from the Concordia University School of Law when Concordia did not receive provisional accreditation from the ABA.)  Across all three years, eight of the top ten schools for percentage of transfers repeated.

Top Ten Law Schools as a Percentage of All Transfers

 

2006

2011

2012

2013

2014

Total Transfers

482

570

587

724

625

Transfers to 10 Schools with Most   Transfers

2265

2427

2438

2501

2187

Transfers to 10 Schools with Most   Transfers as % of   Transfers

21.3%

23.5%

24.1%

28.9%

28.6%

 

The chart above demonstrates an increasing concentration in the transfer market between 2006 and 2014 and even moreso between 2012 and 2014, as the ten law schools with the most students transferring captured an increasing share of the transfer market. 

NATIONAL AND REGIONAL MARKETS BASED ON NEW DATA

Starting this fall, the ABA Section of Legal Education and Admissions to the Bar began collecting and requiring schools with more than five transfers in to report not only the number of students who have transferred in, but also the schools from which they came (indicating the number from each school) along with the 75%, 50% and 25% first-year, law school GPAs of the pool of students who transferred in to a given school (provided that at least twelve students transferred in to the school).  This allows us to begin to explore the nature of the transfer market by looking at where students are coming from and are going and by looking at the first-year GPA profile of students transferring in to different law schools. 

Percentage of Transfers from Within Geographic Region and Top Feeder School(s)

USNews

Ranking

School

# Transfers

Region

Regional

Transfers

Reg. %

Feeder

Schools

#

2

Harvard

33

NE

6

18

Emory-Wash. Univ.

3

4

Columbia

46

NE

19

41

Brooklyn

5

6

NYU

50

NE

20

40

Cornell

8

9

Berkeley

55

CA

43

78

Hastings

18

12

Northwestern

35

MW

24

69

DePaul-Chicago Kent-Loyola

5

13

Georgetown

113

Mid-Atl

49

43

American

13

15

Texas

43

TX

27

63

Baylor

5

16

UCLA

44

CA

31

70

Loyola Marymount

8

18

Wash. Univ.

44

MW

20

45

SLU

4

19

Emory

53

SE

40

75

Atlanta’s John Marshall

20

20

GWU

97

Mid-Atl

78

80

American

54

20

Minnesota

37

MW

21

57

William Mitchell

6

20

USC

30

CA

22

73

Southwestern

5

31

Azizona St.

66

SW

51

77

Arizona Summit

44

45

Florida St.

31

SE

24

77

Florida Coastal

9

61

Miami

29

SE

21

72

Florida Coastal

5

72

American

44

Mid-Atl

14

32

Baltimore-UDC

6

87

Michigan St.

33

MD

33

100

Thomas Cooley

31

87

Loyola Marymount

32

CA

26

81

Whittier

15

 

For this set of 19 schools with the most transfer students, the vast majority obtained most of the transfers from within the geographic region within which the law school is located.   Only two schools (Harvard and American) had fewer than 40% of their transfers from within the region in which they are located and only four others (Columbia, NYU, Georgetown and Washington University) had fewer than 50% of the transfers from within their regions.  Meanwhile, ten of the 19 schools had 70% or more of their transfers from within the region in which the school is located. 

Moreover, several schools had a significant percentage of their transfers from one particular feeder school.  For Berkeley, roughly 33% of its transfers came from Hastings; for Emory, nearly 40% of its transfers came from Atlanta’s John Marshall Law School; for George Washington, over 55% of its transfers came from American; for Arizona State, 67% of its transfers came from Arizona Summit; for Michigan State nearly 95% of its transfers came from Thomas Cooley; for Loyola Marymount, nearly 50% of its transfers came from Whittier; and for Idaho, over 95% of its transfers came from Concordia.

 Percentage of Transfers from Different Tiers of School(s)

Along With First-Year Law School GPA 75th/50th/25th

USNews Ranking

 

# of Trans.

Top 50

# -- %

51-99

# -- %

100-146

# -- %

Unranked

            # -- %

GPA 75th

GPA 50th

GPA 25th

2

Harvard

33

23

70

10

30

0

0

0

0

3.95

3.9

3.83

4

Columbia

46

29

63

14

30

3

7

0

0

3.81

3.75

3.69

6

NYU

50

41

82

7

14

2

4

0

0

3.74

3.62

3.47

9

Berkeley

55

17

31

27

33

6

11

5

9

3.9

3.75

3.68

12

Northwestern

35

16

46

12

34

6

17

1

3

3.73

3.56

3.4

13

Georgetown

113

27

24

38

34

17

15

31

27

3.77

3.67

3.55

15

Texas

43

17

40

13

3

9

21

4

9

3.62

3.45

3.11

16

UCLA

44

15

34

23

52

2

5

4

9

3.73

3.58

3.44

18

Wash. Univ.

44

3

7

25

57

1

2

15

34

3.43

3.2

3.06

19

Emory

53

3

6

7

13

8

15

35

66

3.42

3.27

2.93

20

GWU

97

13

13

73

75

11

11

0

0

3.53

3.35

3.21

20

Minnesota

37

4

11

12

32

18

49

3

8

3.3

3.1

2.64

20

USC

30

1

3

11

37

6

20

12

40

3.71

3.59

3.44

31

Arizona St.

66

4

6

5

8

8

12

49

74

3.51

3.23

2.97

45

Florida St.

31

2

6

4

13

3

10

22

71

3.29

3.1

2.9

61

Miami

29

1

3

4

14

6

21

18

62

3.3

3.07

2.87

72

American

44

2

5

14

32

3

7

25

57

3.25

2.94

2.78

87

Michigan St.

33

0

0

0

0

1

3

32

97

3.19

3.05

2.83

87

Loyola Mary

32

0

0

0

0

1

3

31

97

3

3

3

 

The chart above shows the tiers of law schools from which the largest schools in the transfer market received their transfer students.  Thirteen of the top 19 schools for transfers are ranked in the top 20 in USNews, but of those 13, only six had 80% or more of their transfers from schools ranked between 1 and 99 in the USNews rankings – Harvard, Columbia, NYU, Northwestern, UCLA and George Washington.  Three additional schools had at least 50% of their transfers from schools ranked between 1 and 99, Berkeley, Georgetown and Washington University.  The other ten schools had at least half of their transfer students from schools ranked 100 or lower, with some schools having a significant percentage of their transfers from schools ranked alphabetically.  This data largely confirms the analysis of Bill Henderson and Jeff Rensberger regarding the rankings migration of transfers – from lower ranked schools to higher ranked schools.

In addition, as you move down the rankings of transfer schools, the general trend in first-year law school GPA shows a significant decline, with several highly-ranked schools taking a number of transfers with first-year GPAs below a 3.0, including Emory, Minnesota, Arizona State, and Florida State.

STILL MANY UNKNOWNS

This new data should be very helpful to prospective law students and to current law students who are considering transferring.  This data gives them at least a little better idea of what transfer opportunities might be available to them depending upon where they go to law school as a first-year student.

Even with this more granular data now available, however, as I noted in my earlier posting on transfer students, there still are a significant number of unknowns relating to transfer students.  These unknowns cover several different points.  

First, what is the acceptance rater for transfers?  We now know how many transferred came from different schools and we have some idea of first-year GPA ranges for those admitted as transfers, but we do not know the acceptance rate on transfers.  Are a significant percentage of transfers not admitted or are most students interested in trasnferring finding a new home someplace.

Second, what are motivations of transfers and what are the demographics of transfers?  Are transfers primarily motivated by better employment opportunities perceived to be available at the higher-ranked law school?  Are some subset of transfers primarily motivated by issues regarding family or geography (with rankings and employment outcomes as secondary concerns)?

Third, how do the employment outcomes of transfer students compare with the employment outcomes of students who started at a given law school?  Does the data support the perception that those who transfer, in fact, have better employment outcomes by virtue of transferring?

Fourth, what are the social/educational experiences of transfers in their new schools and what is the learning community impact on those schools losing a significant number of students to the transfer market?

For those interested in these issues, it might make sense to design some longitudinal research projects that could help find answers to some of these questions.

December 20, 2014 in Current events, Data on legal education | Permalink | Comments (0)

Tuesday, December 2, 2014

The Market for Law School Applicants -- A Milestone to Remember

In early 2013, Michael Moffitt, the dean of Oregon Law, was interviewed by the New York Times about the tumult affecting law schools. Moffitt, who is a very thoughtful guy, reponded, "I feel like I am living a business school case study.”  

I think the analogy to the business school case study is a good one.  In the nearly two years since that story was published, the market for law school applicants has actually gotten worse.

Yesterday's Dealbook column in the New York Times featured Northwestern Law Dean Dan Rodriguez (who also serves at President of the AALS) speaking candidly about the meltdown dynamics that have taken hold.  See Elizabeth Olson, "Law School is Buyer's Market, with Top Students in Demand," New York Times, Dec. 1, 2014. 

DanRodriguez"It's insane," said Rodriguez, "We’re in hand-to-hand combat with other schools." The trendlines are indeed terrible.  Year-over-year, LSAT test-taker volume is down another 8.7%.  See Organ, LWB, Nov 11, 2014.  So we can expect the situation to get worse, at least in the near term.      

I applaud Dan Rodriguez for this leadership instincts.  He is being transparent and honest.  Several years ago the leadership of the AALS went to great lengths to avoid engagement with the media. Dan has gone the opposite direction, inviting the press into our living room and kitchen.  

Want to know what leadership and judgment look like?  It looks like Dan's interview with Elizabeth Olson.  Dan's words did not solve anyone's problem, but his honesty and candor made it more likely that we help ourselves.  Because it's Northwestern, and Dan is president of the AALS (something the story did not mention but most of us know), and this was reported by Elizabeth Olson in the New York Times, the substance and tenor of discussions within law school faculties is bound to shift, at least slightly and in the direction favoring change.   

What is the de facto plan at most law schools these days?  Universities are not going to backstop law schools indefinitely. I think the sign below is not far off the mark.  

Outrun-the-bear

We are indeed living through a business school case study, which is both bad and good.   At many schools -- likely well more than half --  hard choices need to be made to ensure survival.  (And for the record, virtually all schools, regardless of rank, are feeling uncomfortable levels of heat.)   A law school needs cash to pay its expenses.  But it also needs faculty and curricula to attract students. The deeper a law school cuts, the less attractive it becomes to students.  Likewise, pervasive steep discounts on tuition reflect a classic collective action problem. Some schools may eventually close, but a huge proportion of survivors are burning through their financial reserves.  

Open admissions, which might pay the bills today, will eventually force the ABA and DOE to do something neither really want to do -- aggressively regulate legal education.  This is not a game that is likely to produce many winners.  Rather than letting this play out, individual law schools would be much better off pursuing a realistic strategic plan that can actually move the market. 

The positive side of the business school case study is that a few legal academics are finding their voice and learning -- for the first time in several generations -- how to lead.  Necessity is a wonderful tutor.  Law is not an industry on the decline -- far from it.  The only thing on the decline is the archetypal artisan lawyer that law schools are geared to churn out.  Indeed, back in 2013 when Dean Moffitt commented about living through a business school case study, he was not referencing imminent failure.   Sure, Moffitt did not like the hand he was being dealt, but as the 2013 article showed, his school was proving to be remarkably resourceful in adapting.

The good news resides on the other side of a successful change effort.  The process of change is painful, yet the effects of change can be transformative and make people truly grateful for the pain that made it all possible.  In our case, for the first time in nearly a century, what we teach, and how we teach it, is actually going matter.  If we believe serious publications like The Economist, employers in law, business, and government need creative problem solvers who are excellent communicators, adept at learning new skills, and comfortable collaborating accross multiple disciplines -- this is, in fact, a meaningful subset of the growing JD-Advantage job market.

In the years to come, employers will become more aggressive looking for the most reliable sources of talent, in part because law schools are going to seek out preferred-provider relationships with high quality employers.  Hiring based on school prestige is a remarkably ineffective way to build a world-class workforce -- Google discovered this empirically.  

From an employer perspective, the best bet is likely to be three years of specialized training, ideally where applicants are admitted based on motivation, aptitude, and past accomplishments. The LSAT/UGPA grid method misses this by a wide margin. After that, the design and content of curricula are going to matter.  It is amazing how much motivated students can learn and grow in three years. And remarkably, legal educators control the quality of the soil.  It brings to mind that seemingly trite Spiderman cliche about great power.

For those of us working in legal education, the next several years could be the best of times or the worst of times.  We get to decide.  Yesterday's article in the Times made it a little more likely that we actually have the difficult conversations needed to get to the other side. 

December 2, 2014 in Current events, Data on legal education, Innovations in legal education, New and Noteworthy, Structural change | Permalink | Comments (5)