Saturday, August 30, 2008
Article in the Economist -- Legal Advice: Should you buy shares in a law firm?, which discusses recent changes in the UK allowing for non-partnership structures for law firms, and external investing by the public via, for example, initial public offerings. While there are real confidentiality concerns that would need to be addressed in any such proposal, investing in law firms strikes me as a proper way to harness the market to even the playing field in mass tort litigation. In particular, plaintiffs' firms should have access to investment capital, so that claims that should be brought are in fact brought. Then our litigation system can focus on getting the economic incentives right via the litigation system, confident that the firms will have the capital to respond. Here's an excerpt from the article:
WERE it possible to buy shares in big British and American law firms, they would appear to be attractive investments. They boast double-digit revenue growth at a time when many companies are suffering. Baker & McKenzie, one of America’s biggest firms, has just announced a 20% increase in annual revenues, which exceeded $2 billion for the first time. Britain’s top four firms have reported revenues up by an average of 15% this year, with all four passing the £1 billion ($1.85 billion) mark.
Investing in law firms is more than just a pipe dream. A change in British law, introduced last year, enables law firms to use business structures other than private partnerships, and allows for external investment and initial public offerings (IPOs). Law firms will have to wait for a new regulator, the Legal Services Board, but everything is due to be in place by 2011.