Legal Profession Blog

Conflicts Draw Suspension

The British Columbia Law Society Tribunal Hearing Division has ordered an eight-month suspension for conflicts of interest

The Panel acknowledges that there are and will be instances when determining potential conflicts of interest before agreeing to act as counsel may be difficult, but that cannot be said to apply to the Respondent’s four acts of professional misconduct when acting for both parties in the loan transactions.  In the Panel’s view, the potential and real conflicts of interest with respect to these loan transactions were, objectively, plain and obvious and should have been such to the Respondent before he agreed to act for the clients.  With respect to the three noted instances of the Respondent acting for both lender and borrower when he had an interest in the lender company, one can simply ask the question: “What if the borrower defaulted in its loan obligations?”  The potential conflict was obvious from the outset. 

The Panel found the Respondent committed professional misconduct when he borrowed a significant sum, being $366,545 from a corporate client.  The Respondent’s submission that the loans were forgivable and not repayable was rejected by the Panel. The Panel found the Respondent’s acts were clear contraventions of rule 3.4-31 of the Code because, in part, the lender client was not an entity from which a lawyer may borrow money.  There was no evidence in the facts and determination hearing (the “F & D Hearing”) that the loan was repaid.

The Panel further found the Respondent committed professional misconduct in acting without integrity when he executed a commercial loan renewal agreement on behalf of his corporate client and for an individual guarantor, when the Respondent had no authority or consent from the corporate client or the guarantor to bind either party to the particular commercial obligation.  The principal balance of the loan was $1,015,367.99 at the time the Respondent executed the loan renewal agreement letter binding both borrower client and the individual guarantor.

 

The Panel finds that when viewed together, the six separate acts of professional misconduct are grave and serious.  The conflicts of interest are numerous and evidence a continuous pattern of disregard of the requirements of the Code and the interests of the clients.  In each of the four loan transactions the Respondent received a benefit, acted deceptively for he did not disclose his personal interest in the lender, and put his personal interests before the clients’ interests.  Borrowing money from the client where prohibited was a significant breach of both the rules and the trust of the client.  Executing the loan amending agreement involving a significant sum while simultaneously continuing to bind a separate individual to a concomitant full indemnity personal guarantee of the client borrower’s loan obligations was an egregious act and a flagrant breach of the Respondent’s duty mandated by the Code to carry on practice and discharge his responsibilities to his client and the public with integrity.

 

The Law Society proposed a six-month suspension

Having duly considered all the relevant factors described above, the Panel orders that the Respondent be suspended from the practice of law for eight months commencing on the first day of the first month following the date these reasons are issued or another date as agreed between the parties in writing.

(Mike Frisch)

Breaking News: Disability Suspension For Peter Angelos

News from the Maryland Supreme Court in this order involving the Baltimore Orioles owner

In an order entered on March 3, 2023 regarding the parties’ Joint Petition for Order Transferring the Respondent to Disability Inactive Status by Consent (the “Joint Petition”), the Court determined that it could not grant the Joint Petition under Rule 19-739 without a statement that the Joint Petition had been approved by the Chair of the Attorney Grievance Commission, as required by Rule 19-739(c)(1). Subsequently, Bar Counsel supplemented the Joint Petition with a line stating that the Chair of the Attorney Grievance Commission has approved the filing of the Joint Petition.

Accordingly, upon consideration of the Joint Petition as supplemented, it is this 9th day of March 2023, by the Supreme Court of Maryland,

ORDERED that the request to transfer the respondent to disability inactive status is

GRANTED to the extent that the respondent, Peter George Angelos, is transferred to disability inactive status pursuant to Rule 19-739(b)(3) and it is further

ORDERED that the Clerk of this Court shall remove the name of Peter George Angelos from the register of attorneys in this Court and certify that fact to the Client Protection Fund of the Bar of Maryland and all Clerks of all judicial tribunals in this State in accordance with Maryland Rule 19-761(b); and it is further

ORDERED that all papers filed in this case, except for this order, are confidential and shall not be disclosed except as permitted by rule or order of this Court. 

(Mike Frisch)

Shortchanged

A two-year reciprocal suspension by the New York Appellate Division for the First Judicial Department based on sanction imposed in the Southern District

the statement of charges alleged that from 2007 to 2019, respondent, as principal of Michael Faillace & Associates, P.C., represented plaintiffs in wage and hour cases arising under the Fair Labor Standards Act (often workers claiming they were denied overtime or proper wages), and regularly used a client retainer agreement that provided, in sum and substance, that if a recovery was made, the client would pay legal services "the greater of a sum equal [to] 40% of any and all sums recovered either as a result of trial or by way of settlement (including attorneys fee awards) or the amount of 'reasonable attorneys fees' determined by the Court or agreed upon [by] the defendants." It was alleged that in 13 specific cases, respondent underpaid clients by disregarding court orders which awarded attorney fees below 40% of the settlement amounts, and instead took funds to which clients were entitled as attorneys' fees in excess of the court mandated amount.

For example, in one case in which respondent's firm represented 13 plaintiffs, the court approved a settlement and approved a total of $205,024.46 in costs and attorneys' fees to be paid to the firm. The court specifically rejected the firm's request for attorneys' fees in the amount of 40% of the settlement amount, finding that one-third of the settlement was consistent with the norms of similar litigation in the Second Circuit and that respondent's firm had not identified circumstances justifying departure from the norms. Respondent disregarded the court order and transferred $280,259.58 into the firm's business account, thereby depriving his clients of more than $75,000 to which they were entitled.

Respondent was also charged with making misrepresentations to the Committee on Grievances. In February 2019, counsel to the Committee on Grievances advised respondent that he was being investigated for alleged professional misconduct. In two letters in response, respondent admitted that in four actions his firm had disbursed lesser amounts of the settlements but claimed that his firm had instituted a number of remedial measures to preclude future disbursement mistakes; in fact, respondent misrepresented the steps taken by the firm. It was also alleged that during a mediation, when two of respondent's clients informed him that they wished to settle their claims, he told them that he would decide the amount of the settlement and would not allow them to settle. As a result, the case did not settle at the mediation.

(Mike Frisch)

An Offer You Can't Make

The Indiana Supreme Court has ordered a 30-day suspension with automatic reinstatement 

The genesis of this case was Respondent’s breakup with his girlfriend in July 2018. In the immediate aftermath of that breakup, criminal and protective order proceedings were brought against Respondent in Hamilton County, and Respondent filed suit against his now ex-girlfriend alleging defamation and other counts. A few months later, Respondent’s ex-girlfriend and her sister filed disciplinary grievances against Respondent with the Commission.

In December 2018, Respondent sent an email to opposing counsel in the defamation case. Respondent’s email demanded, among other things, that the disciplinary grievances filed against him be withdrawn as a condition precedent to settlement discussions.

The criminal and protective order proceedings against Respondent in Hamilton County eventually were dismissed. The Commission also eventually dismissed the grievances filed by the two sisters against Respondent. During its investigation, though, the Commission learned of the email Respondent had sent to opposing counsel in the defamation case, and in July 2019 the Commission filed a disciplinary complaint alleging that Respondent’s demand in that email violated Professional Conduct Rule 8.4(d).

Conduct prejudicial to the administration of justice

But prejudice under Rule 8.4(d) is measured in relation to the “administration of justice” and not any particular outcome for the parties. There can be little question that disciplinary investigations are encompassed within the administration of justice, both in terms of protecting the public from attorneys who commit misconduct and protecting attorneys from unwarranted claims of misconduct made against them. See Admis. Disc. R. 23(1)(c). Accepting as true that the grievances against Respondent were meritless simply begs the question the Commission was charged with answering. See Admis. Disc. Rs. 23(10),

 At the time Respondent made his demand, the Commission had objectively good cause for its investigation, as Respondent was facing criminal charges and was the subject of a temporary protective order in connection with his alleged conduct toward his ex-girlfriend. That much of this eventually was resolved in Respondent’s favor does nothing to alter the need for the Commission to investigate the allegations made in the grievances, and for that process to occur free from any attempts to undermine it.

Respondent’s frustration at having to deal with meritless disciplinary grievances certainly is understandable. He is not alone in that regard. The vast majority of grievances filed against attorneys are dismissed by the Commission for want of reasonable cause to believe misconduct has occurred...

It also is understandable under the circumstances that Respondent might wish to have other pending matters against him be resolved before entering into any settlement in his defamation case. But there is a right way and a wrong way to go about addressing these matters, and our precedents make clear that any attempt—however mild or unsuccessful—to interfere with the investigatory process required by Rule 23 or use the disciplinary process to leverage more favorable settlement terms is forbidden.

An aggravating factor

Were this the end of the story, we likely would issue a public reprimand here as well. Respondent has no prior discipline, his improper demand to opposing counsel was a minor violation, and no other acts of misconduct have been charged in this matter. But in assigning a sanction, we consider aggravating and mitigating factors as well. See, e.g., Matter of Bernacchi, 83 N.E.3d 700, 703 (Ind. 2017). Here, we simply cannot turn a  blind eye to Respondent’s abusive conduct during these proceedings against the Commission’s staff, the hearing officer, the judge in his defamation case, and even members of this Court. Accord id. at 703-04 (considering the respondent’s conduct during the disciplinary proceedings when deciding on sanction). While we will not repeat here the full range of epithets and ad hominem attacks Respondent has directed toward others, he repeatedly attacked the Commission for incompetence and corruption, including calling the Commission’s Executive Director a “buffoon” and “playground weakling” and the Commission’s staff attorney an “errand boy.” (Comm’n Exs. 9, 10, 11, 13, 20, 27, 33, 35, 36, 41). Respondent has also accused the judge in his defamation case of having “betrayed and shamed his oath and his office,” he has accused the hearing officer of being a “puppet,” and he has repeatedly accused members of this Court of having improperly attempted to influence the hearing officer in this matter. (Comm’n Exs. 30, 33, 36, 38, 41; Pet. for Rev. at 10, 17).

Let us be clear: attorneys have every right to defend themselves in disciplinary investigations and proceedings using every bit of persuasive power that facts, law, reason, and rhetoric can offer. But they do not have a right to merely hurl senseless invective and baseless allegations toward opposing counsel, judicial officers, and everyone else with a connection to the matter. Such vituperative and unfounded conduct unnecessarily undermines the legitimacy of proceedings and “has no place within the contemporary practice of law.” Matter of Crumpacker, 269 Ind. 630, 663, 383 N.E.2d 36, 52 (1978). It also is not effective advocacy, whether on behalf of a client or oneself. Respondent has advanced colorable arguments on occasion during these proceedings, but it has not helped his cause that we have had to wade through reams of vitriol to find them.

The Indiana Lawyer reported on the bar case and has a link to the complaint, (Mike Frisch)

Double Disbarment For Billing Deceit

The Oklahoma Supreme Court has imposed reciprocal disbarment based on an identical Colorado sanction

The Supreme Court of Colorado determined that Respondent violated Colorado Rules of Professional Conduct (Colo. RPC) 8.4(c) and 1.15A (as well as the former Colo. RPC 1.15(b)), by committing knowing conversion / misappropriation.² The court determined Respondent knowingly misappropriated roughly $57,338. The amount in question was billed to Respondent's firm Kleinsmith & Associates, PC (in which he was a solo practitioner) by First American Title Company, LLC and First American Title of Montana, Inc. (collectively, First American) for title services in connection with Respondent's representation of a client, U.S. Bank. Respondent obtained the $57,338 from his client U.S. Bank by billing for "title commitment" but proceeded to use the funds U.S. Bank gave him for his firm's unrelated operating expenses rather than paying First American the amount it was owed. First American subsequently filed a lawsuit and obtained a judgment for $55,782 against Respondent's firm, which it has been largely unable to collect.

No comfort here

The record before this Court is clear that Respondent engaged in deceitful billing practices that resulted in his client paying $57,338 for First American's services. That amount was then knowingly misappropriated by Respondent and instead used for other purposes, causing substantial harm to First American. The conduct for which Respondent was disbarred in Colorado warrants disbarment in Oklahoma, given Respondent's failure to contest the Complainant's recommendation, the lack of mitigating circumstances, and Respondent's prior disciplinary history. It is hereby ordered that Respondent Philip M. Kleinsmith be disbarred and his name stricken from the roll of attorneys. As Complainant did not file an application to recover the costs of this disciplinary proceeding, no costs are assessed.

(Mike Frisch)

Politics As Unusual

The New York Appellate Division for the Second Judicial Department has imposed disbarment for an attorney's felony conviction.

The attorney pleaded guilty in federal court to offenses relating to

...his participation in a scheme, from in or about November 2012 up through and including in or about April 2013, an object of which was to accept a bribe in exchange for authorizing a member of the Democratic Party to appear on the Republican Party primary ballot for New York City Mayor, in violation of New York Penal Law §§ 200.45 and 200.50 (hereinafter the 2013 NYC Mayor Bribery Scheme).

Disbarment was automatic for this felony conviction.

The New York Post reported that the attorney was the head of the Bronx Republican Party. (Mike Frisch)

The Off Chance

A Delaware Superior Court judge imposed a $500 sanction on an attorney who sent an associate to conduct a deposition in a Delaware action prior to the pro hac vice admission of the associate.

The action involves allegations arising out of the death of an undergraduate who had attended a college fraternity function and died of acute alcohol poisening.

There have been numerous depositions. The deposition at issue had been difficult to schedule. The partner (who was admitted for the case)  had a conflicting obligation to appear before the Department of Homeland Security. The associate went in his stead.

The judge found that the associate could not properly participate without first being admitted. The court had "little doubt" that a timely motion for admission would have been granted and found no prejudice from the associate's participation.

The sanction was imposed on the supervising partner. The court declined to strike the associate's examination of the witness and closed with this thought:

On the off chance that counsel for any of the moving defendants wish to pursue this [unauthorized practice] issue, they should file an appropriate complaint with the Office of Disciplinary Counsel.

(Mike Frisch)

Not There

The Georgia Supreme Court has disbarred an attorney, primarily based on misconduct in a paternity matter.

The attorney was retained by a client who had a DNA test that confirmed he was not the child's father. The matter was continued twice, with the attorney present both times. The case was then mistakenly reset for a Monday rathar than a Wednesday. The error was corrected and notices went out for the Wednesday hearing.

The attorney moved to withdraw prior to the hearing but the motion was not acted on. On the Monday, the client went to the attorney's office, made a fee payment, and went to court. The client realized "that something was amiss" and was advised of the date change. The client came back on Wednesday; the attorney never appeared despite repeated phone calls and assuarnces to the client that she would meet him in court. The matter was dismissed that afternoon.

The attorney falsely claimed in the bar proceedings that she appeared on both Monday and Wednesday. Four people testified to the contrary. (Mike Frisch)

No Agreement To Arbitrate

An attorney was hired as "of counsel" of another attorney under a one-year employment contract on November 1, 2005. The contract authorized discharge for cause and had an arbitration clause. The employment relationship had "issues" but extended past the fixed term. Eventually, the employed lawyer was discharged with notice given in August 2007. The parties disagree as to the reasons. The employed lawyer sued the employing lawyer on claims that included wrongful discharge. The employing lawyer moved to dismiss, invoking the arbitration clause.

The Washington State Court of Appeals, Division I held that the there was no basis to conclude that the lawyers agreed to extend the arbitration provision beyond the fixed term:

Where a fixed-term employment contract expires and the employee continues to render the same services provided under the previous agreement, a court will presume that the employee is serving under a new, implied contract having the same terms and conditions as contained in the expired contract. However, where it is clear that the implied contract does not have the same terms and conditions as the earlier agreement, there is no basis
to presume that the contracting parties necessarily renewed any specific term of
the prior agreement. Because the evidence in the record and the pleadings
herein establish that Judith Lonnquist and Reba Weiss did not completely renew
the terms of Weiss's written, fixed-term employment contract after Lonnquist
terminated it, there is no basis to presume that the parties subsequently entered
into an implied agreement to arbitrate Weiss's employment-related claims as was provided for in the terminated contract. Inasmuch as a court cannot compel litigants to arbitrate claims unless they agreed to do so, the trial court correctly denied Lonnquist's motion to compel arbitration. Accordingly, we affirm.

(Mike Frisch)

Deferred Associates May Serve As Judicial Interns

The Massachusetts Committee on Judicial Ethics has issued an advisory opinion on the propriety of allowing law firm associates with a deferred start date and financial benefits to serve as unpaid judicial interns. The committee does not view the proposed hiring of interns as prohibited:

...the principal focus of this program is to serve the needs of the understaffed Trial Court and the people it serves, mitigating the effects of a severe shortage in law clerks that the Trial Court faces beginning in September 2009 as a result of the economic crisis and budget cuts. Any private benefit to the law firms involved is secondary to that benefit, and it is no different from the benefit to any law firm which has hired an associate in the ordinary course whose start-date follows the completion of a judicial clerkship...

          Second, your inquiry raises the issue of whether the volunteer interns are a "gift" or "favor" to the judges of the Trial Court from the law firms. Section 4D(5) prohibits a judge from accepting "a gift, bequest, favor, or loan from anyone except for" certain situations, none of which applies here. The Committee is of the opinion that, even if the volunteer interns are gifts or favors from the law firms to the judges of the Trial Court, they are permissible under the Code given the double blind structure of the proposed program. "The Code must be read as a whole. . . . [and] [t]he Canons and Sections are rules of reason. Some conduct that may literally violate a provision of the Code [i.e., Section 4D(5)(h) here] will be permissible because it does not violate the policy behind the prohibition or is de minimis." Preamble to the Code. As concluded for the reasons described in this opinion, a disinterested objective observer would not question the impartiality of the judges of the Trial Court when the law firms donating the volunteer interns appear before the judges. The program therefore would not violate the policy behind Section 4D(5)(h) and is permissible under the Code.

(Mike Frisch)

A new low in the collegiality wars

A friend of mine from Houston forwarded me this letter (here), which has to be a new low in collegiality. [Nancy Rapoport]

Class of 2007: A More Extreme Bi-Modal Distribution

[By Bill Henderson, cross-posted to ELS Blog]

NALP just published its 2007 edition of Jobs & JD's. One topic of interest to students, lawyers, law firms, and legal educators is the change in salary distribution from 2006 to 2007.  The now famous 2006 bi-modal distribution was vivid evidence that the U.S. legal profession is undergoing significant structural change.  As shown in the graph below (from this NALP webpage entitled "Another Picture Worth a 1,000 Words"), the underlying stressors are even more pronounced for the class of 2007. 

The sample is based on 23,337 law school graduates from the class of 2007 who reported salary information.  Note, however, that 197 ABA-Accredited law schools graduated 43,518 students in 2007.  Although we know the types of jobs taken by 40,416 grads, only 57.7% of this group provided salary information.  If I had to wager on the direction of underreporting, I would predict it was under-inclusive of graduates with lower salaries and those who did not pass the bar.  Why?  Aside from the human psychology that it is easier to share flattering rather than embarrassing information, the roughly 7,500 jobs under the second mode are fairly close to figures I have seen from ALM and NALP data, which are provided by large law firms rather than individual students. See, e.g., charts in this NLJ article.

This bias, however, is not necessarily good news.  In the above graph, 32.5% of the law graduates took jobs with starting salaries in the $100K+ range; but the true percentage for the class of 2007 is probably lower.   Some facts and then one normative observation.  The facts first:

More after the jump ...

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Part II: How most law firms misapply the "Cravath system"

[Posted by Bill Henderson, cross-posted to ELS Blog]

In my last post, I discussed the linkage between the bimodal distribution and the emphasis on credentials under the "Cravath system."  I also stated that most law firms misunderstood the internal logic of the original Cravath model and promised to elaborate in a subsequent post.   This is the promised entry. 

One note of context:  this post is not a history lesson.  The Cravath system reflects a profoundly powerful method of developing human assets.  Cravath started with very good associates/inputs  and turned them into truly exceptional lawyers who were in high demand by clients and other firms.   Moreover, the Cravath system required lawyers to work together collaboratively to further the clients' interests.  This resulted in efficient and highly effective legal services that engendered the abiding loyalty of clients and more demand for the firm's services. See Results or Résumés at 4 & n. 13 (discussing concept of firm-specific capital). In other words, under the true Cravath system, everyone comes out ahead. Two caveats:  (1) the first-mover--here, Cravath 108 years ago--garners the most benefit; (2) if a firm neglects a key element--e.g., investing in associates--the model generates no competitive advantage.

[Sources: The Cravath system described below come primarily from Robert Swaine's 1948 history of the firm and other contemporaneous sources from the 50s, 60s, and 70s, which I will cite as appropriate.]

Recruiting Elite Law School Graduates

One of the hallmarks of the Cravath system is the recruitment of elite law school graduates.  As of 1948, Cravath, Swaine & Moore and its predecessor firm had employed a total of 454 law school graduates as associates.   Of this total, 67.7% attended Harvard (128), Columbia (124), or Yale (54).  According to Swaine, "in recent years there has been an increasing number from the law schools of the Universities of Virginia and Michigan."  These two schools rounded out the top five :  (UVA 30, Michigan 26).

Cravath's emphasis on credentials, however, had a clear economic logic that was designed to compensate for the deficiencies of early 20th century legal education.  During this period, most law schools required little or no college education.   In contrast, Harvard, Columbia, and Yale grads typically had a college degree before entering law school.  Swaine writes,

Cravath believed that disciplined minds are more likely to be found among college graduates than among men lacking in formal education ... .

Cravath believed in seriousness of purpose--a man with a competent mind, adapting to practicing law according to Cravath standards, should have made a good scholastic record at college.  But he recognized, without full approval, the tradition of the early decades of this century--that "gentleman" went to college primarily to have a good time and make friends.  Hence, while a good college record was always a factor in favor of an applicant, lack of such a record was not necessarily an excluding factor. ... [I]n the stern realities of the depression of the '30s, however, college records of applicants came to have added importance.

Yet, "[f]or a poor law school record Cravath had no tolerance."  Candidates who "had not attained at least the equivalent of a Harvard Law School 'B' either had a mind not adapted to the law or lacked purpose and ambition ... ."  Thus, the "first choice" was a "Phi Beta Kappa man from a good college who had become a law review editor at Harvard, Columbia or Yale."

Note, however, that Cravath's emphasis on credentials had a clear business purpose designed to compensate for the limitations of legal education.  During the first half of the 20th century, going to an Ivy League law school did not guaranteed legal aptitude. Prior to advent of the LSAT in 1948, college grades were the only predictors of success in law school.  In 1955, The "LSAT Handbook" included cross-tab tables of LSAT scores versus law school performance for several individual law schools.  At Harvard Law, roughly 1/3 of the class scored below the 50th percentile.  On the west coast, UC Berkeley had a similar wide range of LSAT scores.  See The Law School Admission Test and Suggestions for Its Use (ETS 1955).  The clear relationship between LSAT and grades subsequently  encouraged law schools to revamp their admissions criterion.   But that process took decades.  See Lunneburg & Radford, The LSAT: A Survey of Actual Practice, 18 J. Legal Educ. 313 (1965).

In a talk at Harvard Law School, Cravath stated that a successful "lawyer of affairs" (aka corporate lawyer)  assumed "the fundamental qualities of good health, ordinary honesty, a sound education and normal intelligence."  On top of these attributes, a candidate must have "character, industry and intellectual thoroughness, qualities that do not make for charm but go far to make up that indefinable something that we call efficiency.  Brilliant intellectual powers are not essential."

More after the jump ...

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New Blog From a Hiring Partner Offers Great Tips From the Inside

Posted by Alan Childress

Enter the blogger named Hiring Partner.  The semi-mysterious guy (or is he a guy? -- actually seems like a composite, to me, of a hiring partner and the firm's recruitment coordinator, but I don't mind) started to blog Friday, at Hiring Partner's Office, and it is already interesting.  He sits at the other side of the summer associates' (and later 2L interviewees') worldview.  "I am the hiring partner at an office of an AM LAW 200 law firm.  I oversee on campus recruiting at targeted law schools for our office and local candidates for other firm offices.  I also manage our summer associate program."  He is the decider.

Why blog?  Mainly it's "the millenials (sp?). I keep hearing it is a generational thing.  I thought it would be useful to have a blog where law students and others can learn about things that -- despite their great grades and stellar pedigrees -- can nevertheless disrupt your getting an offer at the firm of your choice. You would be amazed at some of the things that have been occurring." 

On the 'amazed' front, consider his top ten things that annoy your hiring partner, compiled after a poll of hiring partner friends.  (I had no idea they formed a clique.)   For example, advice at a social function held at some partner's house:

Be charming and pleasant.  Be respectful.  DO NOT take off your flip flops (btw, don't wear flip flops!) and put your bare feet on the partner's couch/chair, etc -- YES, I saw this one happen myself.  YOU ARE NOT AT HOME.

And a later post asks summer associates to assess where they are, substantively, not just socially.  Finish strong.

How the "Cravath System" Created the Bi-Modal Distribution

[posted by Bill Henderson, crossposted to ELS Blog]

The bi-modal distribution (graphic to the right, originally posted at ELS) continues to generate interest in the blogosphere.  See, e.g., Greg Mankiw, Right Coast, Broken Symmetry. The  chart summarizes the starting salaries for lawyers who graduated from law school in 2006.  One reason the bi-modal structure is so jarring is that it demonstrates that measures of central tendency, such as average or median, are not necessarily reliable guides for law students' future earning power.  In conventional labor markets, that disconnect is rare.

NALP recently dug into its archives to determine whether this stratification is a persistent feature of the entry level law market. See NALP Bulletin (Jan. 2008). It turns out that 15 years ago, the market followed a much more traditional distribution.   The chart below summarizes the salaries for the class of 1991.

The 1991 graph is right skewed but bears some resemblance to a normal curve.  Below is the graph for 1996:

The rightward skew is a bit more pronounced and the area under the $75K to $85K range is becoming more substantial.  A more seismic shift is seen in 2000 (below) with the emergence of a second mode at the $125K price point. 

At the height of the Internet boom, a remarkable 14% of all entry level lawyers took jobs at the $125K level.  According to NALP, "never before had a single salary so dominated the landscape."  Under the 2006 bimodal distribution (see chart above), 44% of graduates received entry-level salaries in the $40K to $60K range; yet, the second mode moved further to the right ($135K to $145K) and grew to 17% of all graduates.

What are the market forces that have created this peculiar salary structure?  In my working paper, "Are We Selling Results or Résumés?: The Underexplored Linkage Between Human Resource Systems and Firm-Specific Capital," I posit that the runaway $160K mode is a confluence of two factors: (1) the continued growth in the corporate legal services market, primarily due to the growing scale and scope of transnational corporate activity; and (2) law firms' nearly universal adherence to the "Cravath system," which purports to hire the best graduates from the best law schools and provide them with the best training.  More after the jump. ...

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Follow Up to Career Advice - In-House Prospects

Orin Kerr graciously linked from the Volokh Conspiracy over here to the litigation versus corporate career post.  I want to return the favor by linking back to a set of comments being posted over there.  The same over at Above the Law.  There are a number of thoughtful comments out there. 

One of the themes being discussed is whether it's easier to move in-house if you've been a transactional lawyer or a litigator in-house.  I don't have any idea what the data is on this, but my philosophy as a general counsel, unless I was hiring for a specific specialty, like a litigation supervisor, an HR lawyer, or a patent lawyer, was to look for the best available athlete, and I had a track record of hiring both transactional and litigation lawyers to be divisional or business group GCs.

Many leading GCs are or were former litigators, including Jeff Kindler, first at McDonald's and then Pfizer (and now CEO of Pfizer), Peter Kreindler at Honeywell, Don Kempf at Morgan Stanley, Paul McGrath at FMC Corp. and then American Standard, and the list could go on and on.  John Donofrio, the GC at Visteon, and Bob Armitage, the GC at Eli Lilly, are patent lawyers by background.

I think many of the comments reflect something I suggested before, which is how hard it is at the bottom of the heap to experience what it's like to be a senior lawyer in either specialty.  For example, the communication skills you learn as a litigator translate nicely into talking publicly to a board or in a negotiation.  A congenial personality works well in front of a jury as well as in a boardroom (the six or twelve lay people in either environment tend not to like assholes any more than anybody else).  One of my mentors at Dykema, now retired, Don Young (Harvard '63 I think) had a fearsome reputation both internally and externally (as a summer associate I drew a cartoon of an associate who looked like he had just put his finger in an electric socket; the caption had him saying to another lawyer, "Don Young just reviewed my research memo"), but in front of a jury he was the embodiment of Mr. Charm.  Fortunately, despite the fearsome reputation, he also had a sense of humor and an appreciation for chutzpah in young lawyers, much less summer associates who had yet to get an offer!

[Jeff Lipshaw]

Litigation or Transactional Law Career: Some Advice to Law Students

Posted by Jeff Lipshaw

A reader who is interning in a NYC corporate law firm, and about to enter law school, saw my earlier post alluding to the creative possibilities in transactional work, and sought advice about choosing between transactional work and litigation work.  I'm happy to share some thoughts.

1.  Mostly I will be talking about big firm practice, but I should issue a disclaimer.  There's big firm practice, and there's mega-firm practice.  The reason it's important to make the distinction is because I'm looking backwards at a career in which many of the fulfilling aspects came later, after I did my time in the trenches (both in litigation and corporate).  So there is a substantial period of learning how to chop the wood before a new lawyer gets to build, much less design, the house.  My perception is that period is shorter in big firms outside of the financial centers.  You will probably take on more responsibility more quickly at a big firm in Detroit than Chicago, in St. Louis than Los Angeles, in Salt Lake City than New York.   [UPDATE:  See comment below on how this differs between transactional and litigation.]

2.  Law school, at least the way it's mostly taught, does not tell you much about the way the transactional practice works.  That's because of the case method.  Cases are always about litigation.  (Interestingly, business schools teach transactions in the case method, but they are cases in doing business, rather than litigating about it.)  Even contracts class, as usually taught, is something of a bait-and-switch.  Don't blow it off, because you'll need it for the bar exam, but there's not a lot of contract law that comes to the fore in transactional practice.  I often say, and am probably not far off, that the practice of contracts is 90% interpretation, and 10% all other (offer and acceptance, consideration, duress, mistake), and the teaching of contracts is 90% all other, and 10% interpretation.  Litigation tends to involve the LAW a lot more.  The number of occasions for going to the library and doing extensive research on a legal issue is far greater in litigation, and when you do research an issue on the transactional side, it rarely turns into work product in the way a brief springs out of the cases.  You might do corporate research, for example, on whether a transaction involves substantially all of the assets of a corporation, and hence require shareholder approval, but that will tell you how to structure the deal, not be the basis for an argument.

3.  Are you a win-lose kind of person or a win-win kind of person?  Great trial lawyers are sublimated warriors.  Winning a trial or decimating a witness in cross-examination is the thrill of conquest and vanquishing.  If you are not that kind of person, it can wear on you.  Personally, I realized ten years into a litigation career, (a) I wanted to be liked (if not loved) too much to be a conqueror, (b) dealing with the opponents' conception of the truth (opening up the other side's brief and reading it, for example) was frustrating and hard on my blood pressure, and (c) as I discuss below, once you get beyond the adrenaline rush that causes your eyeballs to pop out of your head (some people like that), the way trials work in cases that big firms do can be kind of . . . boring.

On the flip side, negotiating transactions is also "adversarial" in a way, and a lot of it is about winning points.  Just like a litigator can't win without good facts and good witnesses, a transactional lawyer can't make points without exogenous business leverage.  For example, even in a "friendly" business combination involving public companies, there are a series of points negotiated between the acquirer and the target that have to do with how tied up the deal is.  The task for the sellers is to maintain some wiggle room for future leverage, and the task for buyers is to make it as difficult as possible for the target's board of directors, short of violating their fiduciary duties, to get out of the deal if a better one comes along.  But that's all less a matter of the lawyer's skill than the leverage the client has or lacks.  (See the Bear Stearns - J.P. Morgan deal for an example of this.)

The bane of a transactional lawyer's existence, though, is an adversary who seems more intent on winning "lawyer points" than getting the deal done.  One aspect of creativity in deal lawyering, it seems to me, is knowing when to hold 'em and when to fold 'em - how to concede the points you don't need, or trade them for the ones you do.  Negotiating with a lawyer who, like a litigator, needs to conquer or vanquish, is tiresome.

One of my late ex-colleagues and dear friends told me that he found the give-and-take of negotiated deals tiresome in just that way, and that's why he "stuck to raising money in the public capital markets."

4.  The first part of a career, whether in litigation or corporate, is a combination of doing the grunt work and learning professional techniques.  Doing the grunt work, well, sucks.  Learning the professional techniques, whether it's second-chairing a deposition, or attending the negotiation of the acquisition agreement, is a lot of fun, as long as you like to learn.  Being creative with those techniques is something that comes later.  Two examples.  Litigation.  An old saw of cross-examination is that you never ask a question for which you don't know the answer.  That pretty much guarantees that you won't make a mistake.  But great cross-examiners violate that rule all the time, because they know what questions to ask in which they either don't care what the answer is, or have a plan for whatever comes out.   Corporate.  Things like the shareholders' rights plan (the poison pill) are invented by creative lawyers.  But generally that's by lawyers with cycles of learning in the transactions.

Moreover, technique in itself can get old.  It's the context then that supplies the interest.  I'll give two non-legal professional examples.  When my daughter was born 24 years ago, I was (obviously) blown away by the experience.  I said something to the OB about how thrilling it must be to deliver new babies.  He said the physical aspect of it lost its wonder after a while, and the thrill came from dealing with the parents.  Or to take a counter example, dentistry.  I don't know how much professional satisfaction comes from doing fillings and crowns once you've mastered the technique.  I do understand dentists have high suicide rates, compared to other professions, for whatever reasons. 

Similarly, mere technique in high-powered litigation or corporate work can get old.  As I've said, I didn't like litigation.  We had a ten week trial in Cheyenne, Wyoming in 1986, litigating a whole set of complex contractual issues between a coal supplier and a utility.  In the midst of what ought to be the most exciting time for a corporate litigator, I realized I was bored.  I knew what every already deposed witness was going to say, and what the cross-examination would be.  In corporate work, it got to the point that I negotiated the key business points of the deal, but was bored stiff by the lawyers' wrangling over the environmental representation or the interstices of the definition of the "knowledge" standard for representations that hinged on it.

5. (UPDATED)  Get good mentoring on this.  I don't take anything away from law professors (I am one, after all), but note that the experience (as opposed to mere knowledge or analysis) of mature practice occurs well after most professors have left practice to go into the academy.  Indeed, at the 2-4 year level, which is pretty common, you are still moving from grunt work to learning technique.  Obviously, thoughtful professors will have observed what senior lawyers do, and can be intelligent and insightful, but they haven't necessarily experienced what it's like to be a senior lawyer in practice.   Many of those senior lawyers - corporate and litigation - have real passion for their jobs, and it pays to listen to them talk about why.  Or talk to adjunct professors.  One of my most rewarding classes was a mock litigation course taught by Charles Marson, who had been the Executive Director of the northern California ACLU.

As with many decisions in life, there's no silver bullet, or algorithm, or pat answer.  You just pays your money and takes your chances!

Young Lawyers: What Do You Want to Be When You Grow Up? (And Can You Repay the Loans?)

Posted by Jeff Lipshaw

I have, in the past, expressed some disdain toward the victimology advocated in some quarters over the plight of very highly paid young Big Law lawyers.  The only thing yet that has given me pause to reconsider the fervency of that belief is the troubling and puzzling issue why one would incur up to $100,000 in student loan debt without at least some shot at one of those pricey jobs that would provide the basis for repaying the loan.  Nevertheless, my sense is that the Golden (or at least Silver or Bronze) Handcuffs might well be as effective as the debt in tying one to an unsatisfying career in Big Law, but that's merely reflecting my own experience.  The bigger concern is what happens to people who don't get those kinds of jobs, but incur that kind of debt.

Notwithstanding the economic pressures from whatever source, I think we have to acknowledge, however, some personal accountability for what we want to be when we grow up.  On that score, the February 2008 edition of the ABA Journal, freshly delivered to the mailboxes here in Suite 250, has an interesting pair of juxtaposed articles.  One is an excerpt from Making Waves and Riding the Currents, the memoir of Charles Halpern (left), who left the relative security of Arnold & Porter in the 60s to found the Center for Law and Social Policy, and later became the first dean of the CUNY School of Law.  The excerpt describes his decision to leave Arnold & Porter and its lifestyle (although, notably, the question of being saddled with debt does not come up).  The other is a description of a week in the life of Stephen Susman (right), the founder partner of Houston's Susman, Godfrey, and a big-time Big Law lawyer (albeit an entrepreneurial one), replete with early morning personal training and dog walking in Central Park, breakfasts with George Soros, benefits, fancy lunches and dinners at posh NYC restaurants, conference calls, and prep sessions for pending hearings in which he will be up against David Boies.

Do these stories reflect the polar extremes of what we want to be when we grow up?  Is the idea of personal autonomy and accountability - that either career is achievable - a myth that collapses in the face of the present economic reality facing most of today's law students?

For Lincoln's Birthday Next Tuesday: Kentucky's Lincoln and Brandeis Speak to Young Lawyers

Posted by Alan Childress
Everyone knows Abe Lincoln was born in Kentucky, but I had forgotten that Louis Brandeis was born there too.  Here is a great old post from Kentucky lawyer-blogger Ben Cowgill, 'interviewing' them both about their advice to those entering the legal profession.  It is nicely footnoted and thoughtful.  It is called Old Wisdom for New Lawyers.  One useful exchange:

Cowgill: But I seem to recall that you refused to take vacations as a young lawyer. Did you have a change of heart?

Brandeis: I soon learned that I could do twelve months' work in eleven months, but not in twelve.

Looking for Meaning in Cambridge on Thanksgiving Morning

Posted by Jeff Lipshaw

I wondered this Thanksgiving morning whether there is a blog where the pharmacists who staff the 24 hour CVS in Porter Square (where I filled a prescription), or the baristas who open the Mass. Ave. Starbucks at 6:00 a.m. (where I got some coffee), or the people who work at Kohl's and will be at their stations at 4:30 a.m. tomorrow morning, or the people who drive the T trains all day on the holidays can bitch and moan about their lot in life.  I happened to be reading Paul Gowder's blog post over at Law and Letters about the travails of being an exploited young lawyer, and thought I'd note a couple things.

1.  The "corporate serf" thing or the big firm/do-gooder dichotomy for graduates of the elite schools is just plain wrong.  Thirty years ago, I made a life style decision NOT to go to work at a law firm in New York, opting instead for less money and more lifestyle in Detroit.  That option still exists.

2.  With all the ink spilled about the likely fate of the vast majority of law students, why do they keep going to law school?  Maybe the ones who don't see themselves as victims just don't write about it.

3.  There's an article in the New York Times this morning about the perks that the big law firms offer to their associates in the competitive market for talent.  The list that follows is taken verbatim from the article:  candied apples on everyone's desk from the "happiness committee," milkshakes from Potbelly Sandwich Works, concierge services (pick up theater and sports tickets, dry cleaning, car repair, etc.), top off bonuses, sabbaticals, mortgage guarantees, subsidies for buying hybrid cars, on-site tailoring, personal issues coach and psychotherapists, wine parties (tuna tartare, baby lamb chops), dinner delivered from the Palm Restaurant (on a silver tray), yoga classes, nap rooms, child care, and emergency nanny services.

I return to my thoughts from yesterday about futility.  Very few people in the world are lucky enough to find meaning for their lives in their work.  If you are looking for meaning in your life, and doing your job as a lawyer has as much meaning to you as filling an order for a quad soy latte with extra foam, then you either have to look for meaning elsewhere, or deal with the same cognitive gap of futility in squeezing meaning out of something that is not meaningful.  But lawyers at least have a chance.

When my daughter was born over twenty-three years ago, as we were still basking in the miracle of having created this baby, I remarked to the obstetrician in Ann Arbor (who was about to leave for a post-doc at Duke) how amazing it must be to see babies born every day.  His response was interesting.  He said that the physical act of giving birth had, to him, become routine; the magic and the meaning was in the connection with the people who were his patients.

Practicing law probably falls somewhere between making espressos and delivering babies, but the point is that there's no guarantee that work will make our lives seem important to us, and we need to deal with that either by changing the work or finding another place for meaning.

Happy Thanksgiving!