It looks like in the midst of immigration reform by the Obama administration,things may be looking up for foreign lawyers. Under a resolution approved on Monday by the ABA House of Delegates, foreign lawyers will have limited authority to serve as in-house counsel in the United States.
Resolution 107A is among a series of proposed amendments to the ABA model ethics rules that acknowledge the globalization of law practice. It amends Rule 5.5(d) of the ABA Model Rules of Professional Conduct concerning unauthorized practice and multijurisdictional practice. The amendment states that foreign lawyers may work as in-house counsel in the United States, but they may not give advice on U.S. law unless it is based on the advice of a lawyer who is licensed in the appropriate jurisdiction. A related resolution, 107B, requires registration for foreign lawyers working as in-house counsel.
Seven states already expressly permit foreign lawyers to work as in-house lawyers in the U.S. offices of their clients. This will likely open the gates to foreign lawyers looking to practice in the U.S. But how does that bode with our current economic climate? The legal market has yet to bounce back, and employment numbers are still low. With thousands of U.S. lawyer unemployed and many more U.S. law graduates still seeking employment, how will this impact our market? The answer remains to be seen.
The job market for lawyers is the weakest it has been in the last two decades. Prospects for 2011 law graduates are bleak. According to recent statistics from NALP, among law grads whose employment status was known, only 65.4 percent were in jobs requiring bar passage, the lowest percentage ever measured by NALP.
NALP’s executive director stated “the class of 2011 may represent the bottom of the employment curve for this economic cycle.” Its members were caught up “in the worst of the recession, entering law school in the fall of 2008 just as Lehman Brothers collapsed.”
While only 65.4 percent are finding law-related jobs, the rest of the employment rate for 2011 law school graduates is not much better, with 85.6 percent finding employment, the lowest rate since 1994, when it was 84.7 percent.
With so few law graduates finding legal employment, what are law schools doing about this?
According to a recent Wall Street Journal article, some law schools are cutting the size of their incoming classes, a move legal experts describe as unprecedented. However, of the roughly 200 laws schools accredited in the U.S., only 10 are looking to decrease their incoming classes. Of those cited, are the University of California's San Francisco-based Hastings College of the Law, a top-tier school, Northwestern University School of Law in Chicago ranked 12th in the country by U.S. News & World Report, and George Washington University Law School, ranked 20th by U.S. News.
Why are so few law schools cutting their incoming classes?
The answer is simple: money. Paul Schiff Berman, dean of the George Washington University Law School, ranked 20th by U.S. News, says the school, which enrolled about 480 students in 2011, hasn't decided how many slots would be cut for the incoming class, but he estimates the reduction would cost the school about $1 million.
Law schools are considered profit centers at many universities. If incoming classes are cut, where will they find the money lost from these cuts? Law students are finding themselves caught in a Machiavellian spiral. On the one hand, law schools are profiting from large classes, and on the other, law grads are struggling to find employment. Where does the responsibility lie?
Law schools don’t seem as worried about the employment prospects of their graduates as they are about their pocketbooks. Even those that are considering cutting back incoming classes are not making significant reductions. Hastings College of the Law announced a reduction of 1,000 from 1,300 in phases over the next three years. 100 less law graduates per year? A drop in the bucket. But Hastings is looking at cuts that could cost the school $9 million. Now you get the picture.
That said, law schools are not alone in taking on the blame. The ABA has contributed to churning out more law graduates than the market can bear, with no signs of slowing down. According to the Wall Street Journal, the number of law graduates per year spiked to 44,495 this year from 42,673 in 2006, and the American Bar Association accredited 10 new law schools over the same period.
These 10 new law schools are not Harvard-type law schools either, so you can guess how marketable those law school graduates will be one they are ready to hit the job market. Why the ABA would help worsen the job market by increasing the number of law graduates is hard to comprehend.
Moreover, one could argue that second and third tier law schools have more of a responsibility to cut their class sizes than top tiered law schools. With exception of some of those at the best schools, going for a law degree today is simply a bad investment. Well, those lower tiered law schools don’t seem to agree.
Thomas M. Cooley Law School, the largest in the nation, with 3,700 students, which has campuses in Michigan and recently expanded into Florida, is not interested in reducing the size of its entering class on the basis of the perceived benefit to society, arguing that they meet ABA requirements. "Cooley's mission is inclusiveness," adds Mr. Robb, who says he worries reducing class sizes could disproportionately affect minority students.
How noble. I am sure those same law graduates will feel very included as they line up together in the unemployment line. Luckily for these minority students, Thomas M. Cooley Law School is generously willing to give them the “opportunity” to be straddled with debt with little opportunity to pay it off.
Law grads are hitting the pavement with more debt.
Law students in the class of 2015 will rack up an average of $210,265 in law school debt, according to Law School Transparency, a non-profit group that provides law education information to prospective law students. As for the class of 2016, the group estimates that students will accrue an average of $216,406 in debt. The upward trend in law school debt is astonishing.
In an economic market where salaries are decreasing and opportunities are dwindling, how do law schools justify these increases? When you consider the extreme belt tightening measures that private businesses have been taking to cut down their costs, one has to wonder what type of economic cutbacks law schools have been taking.
Together with the ABA, law schools are churning out more graduates, increasing student debt, and pumping more job seekers in a market that’s already saturated, with little care of how these graduates will fare. In an industry that stresses ethics and moral responsibility, this type of behavior is highly questionable. The worst part is that there does not seem to be an end in sight to this vicious cycle.
What’s the answer?
Should the ABA and law schools be penalized? Of course law school applicants may share some of the responsibility, but law schools and the ABA are the ones responsible for turning them into jobless graduates. They are enablers that are contributing to the unemployment crisis amongst legal professionals. Should we have regulations placing limits on the number of accredited law schools and law graduates? Scrape the ABA with an organization that is free of conflicts of interest? Or trust the market?
We’ve tried the market approach, and the adjustments are not helping turn back the numbers. Today’s law graduates are carrying more than $200,000 in debt, and with 50% privileged enough to make between $45K and $60K per year, they are unlikely to dig themselves from under their debt. Perhaps it’s time to consider other options, including government intervention.
Firms can choose from two alternative diversity goals. The first is a 2% increase in the hours worked by U.S.-based diverse attorneys as a percentage of total hours worked on Microsoft matters, compared with the same time period last year. The second goal is a 0.5 percent increase in the total number of U.S.-based diverse attorneys employed by the firm.
In other words, the first goal focuses on diverse representation for Microsoft, while the second focuses on diverse representation in the firm’s U.S. offices overall. Microsoft practices what it preaches; 44% of its senior counsels are women or minorities, and 50% its junior level attorneys are women or minorities.
Microsoft’s efforts to increase diversity within its outside counsel are noble, but the solution it offers is questionable. Providing “bonuses” for law firms to do what they should be required to do ethically, morally, and professionally in the first place, is a sad commentary on the state of our legal industry.
It is easy to understand Microsoft’s effort to try something new. Four year since the "Call to Action" was launched, little has changed in terms of law firm diversity. Yet, the solution it offers leaves much to be desired. Are incentives without sanctions little less than a bribe? And more importantly, is this an effective solution?
Throwing money at a problem has seldom yielded correct solutions. This is especially true when one considers the types of revenues generated by big U.S law firms. As reported by The Lawyer (March 24, 2008), U.S. firms had their best year ever in 2007, with the top 50 firms generating collective revenues of $46.8 billion!
Will a 2% bonus on hours already worked, as proposed by Microsoft make a difference one way or the other? That’s unlikely for big firms who are already guaranteed to make $150M in fees.
Is it the solution itself that is problematic, or the fact that it lacks teeth to be effective? It’s probably a little bit of both. It is difficult to get over the unpleasant taste of companies giving bonuses, in what essentially mounts to “bribes” to law firms to do what they should be doing in the first place. Perhaps it is part of the solution. While it is evident that in order to effect tangible change, companies need to tie their demands to the purse strings of law firms, spending more money on a broken system will not alone fix the problem.
What we need is accountability from law firms. Law firms need to develop business plans and strategies that fundamentally incorporate diversity as part of their structure and organization, together with measurable benchmarks and goals. In order to obtain this, companies should implement a combination of sanctions and incentives that have measurable impacts on the revenues of big law firms.
If Microsoft had in addition to its "Law Firm Diversity Program" implemented a measure whereby it committed to only engage law firms that either increased the hours worked by its U.S.-based minority attorneys by 2%, or increase the total number of their U.S.-based minority attorneys by 0.5% - then the policy would have had the kind of teeth to effect real change. Threatening $150M in revenues has a lot more of an impact than potentially adding another $30M to the pot.
Many corporate clients already reward diversity in their outside counsel (not in terms of bonuses per se, but by giving these firms more work, preferred provider status, or by hiring them in the first place)—yet, the numbers of women and lawyers of color at those firms have not changed much. Obviously, rewards alone, whether monetary or otherwise, are not sufficient to effect change in this situation.
The Call To Action pledged that corporations would end relationships with law firms that hadn't made significant progress in becoming more diverse. Yet, few companies have committed to this pledge. If they had, the legal landscape might look quite different.
Susan Hackett, senior vice president and general counsel of the Association of Corporate Counsel, who has been involved in Call To Action, stated in a recent (May 2008) National Law Journal article that companies were not ready to make this kind of sacrifice.
"While they may be committing to diversity principles, that's a difficult decision when talking about firms that have done good work for you," Hackett stated. Also, general counsel executives could feel hypocritical judging the diversity of the law firms they use if they haven't made substantial progress in their own law departments, she said.
If this is the case, then how can companies ask law firms to increase diversity within their ranks when they are not committed to doing the same within their own legal departments, or are unwilling to make the necessary sacrifices themselves? Most probably can't. On the other hand, a company like Microsoft, that has made a genuine commitment to diversity, had an opportunity to take a stance and initiate real change. Instead, it stopped one step short…and so will its law firms.
- Robert Graham; Assistant GC, General Re Corp; Securities fraud
- Michael J. Pietrzak; GC and CFO, Hexagon Consolidated Cos. of America; Securities fraud
- Peter Atkinson; EVP, GC, Hollinger Inc.; Mail and tax fraud
- Mark Kipnis; Chief corporate counsel, Hollinger Inc.; Mail fraud
- Bruce Hill; GC, Inso Corp.; Perjury (jury deadlock on securities and wire fraud)
- Chris Gunderson; GC, Universal Express Inc.; Securities fraud
- Anne Hovis; GC, Phlo Corp.; Aiding/abetting SEC violations
- Mitchell Drucker; Associate GC, NBTY Inc.; Insider trading
- Kevin Heron; GC, Amkor Technology; Insider trading
- Charles Spadoni; GC, Triumph Capital Group; Racketeering, theft/bribery
Settled or Pleaded Guilty
- Scott Lodin; GC, Andrx Corp.; SEC violations
- Thomas Bucknum; GC, Biogen Idec Inc.; Insider trading
- Jane Kober; GC, Biopure Corp.; Securities fraud
- Jon Bloodworth; GC, Busybox.com; IPO fraud
- Steven Woghin; GC, Computer Associates International; Conspiracy/securities fraud, obstruction of justice
- William Sorin; GC, Comverse Technology, Inc.; Conspiracy/securities, mail, wire fraud
- John Isselmann Jr.; GC, Electro Scientific Industries Inc.; SEC violations
- Craig Scott; CFO and GC, FFP Marketing Company Inc.; Securities fraud
- Jonathan Orlick; GC, Gemstar-TV Guide International; Securities fraud
- David Drummond; GC, Google, Inc.; SEC violations
- Kevin Hunsaker; Senior Counsel/Chief Ethics Officer, Hewlett-Packard Co.; Fraudulent wire communications
- James Moen; GC, Katun Corp.; Wire fraud/computer-related fraud
- Myron Olesnyckyj; GC, Monster Worldwide; Options backdating
- Randi Collotta; Associate, Global Compliance Division, Morgan Stanley; Conspiracy/securities fraud (insider trading)
- Steven Hunt; President/GC, Southmark Advisory Inc.; SEC violations
- Leonard Goldner; EVP/GC, Symbol Technologies, Inc.; Conspiring to obstruct the IRS, securities fraud
- Kenneth Selterman; GC, Take-Two Interactive Software Inc.; Options backdating
- Howard Udell; CLO, The Purdue Frederick Company, Inc.; Misbranding a drug
- Stanley Silverstein; GC, The Warnaco Group, Inc.; SEC violations
- David Klarman; GC, U.S. Wireless Corp.; Mail fraud, money laundering, SEC violations
- Andrew Marks; Chief Patent Counsel, Vertex Pharmaceuticals, Inc.; Insider trading
- Fred Stone; GC, Millennium Management; Fraudulent market timing
- Herbert Getz; GC, Waste Management Inc.; Securities fraud
Acquitted or Charges Dismissed
- Scott Monson; GC, JB Oxford Holdings, Inc.; Late trading
- Scott Wiegand; GC, PurchasePro.com; Conspiracy, Securities fraud
- Mark Belnick; Chief Corporate Counsel, Tyco International; Fraud
- Jay Lapine; GC, HBO & Co.; Acquitted on one charge of securities fraud, mistrial declared on six other counts.
- Daniel Adkins; GC, Xpress Pharmacy Direct; Various charges related to running an illegal Internet pharmacy
Indicted or Charged; Cases Pending
- Nancy Heinen; GC, Apple Inc.; Options backdating
- Jilaine Bauer; GC, Heartland Advisers Inc.; Insider trading
- Lisa C. Berry; GC, Juniper Networks Inc.; Options backdating
- Kent Roberts; GC, McAfee Inc.; Options backdating
- Susan Skaer; GC, Mercury Interactive; Options backdating
- Eric Deller; GC, Peregrine Systems Inc.; Aiding/abetting fraud
- Richard T. Nelson; GC, Peregrine Systems Inc.; Securities fraud
- W. Roderick Johnson Sr.; GC, Rocky Mountain Energy Corp.; Securities fraud
- Christi Sulzbach; GC, Tenet Healthcare Corp.; Securities fraud
- Eric Jaeger; EVP-Corporate Affairs; GC, Cabletron Systems Inc.; Securities fraud
- Jordan Mintz; GC, Enron Corp.’s Global Finance Group; Securities fraud
- Rex Rogers; Associate GC, Enron Corp.; Securities fraud
- David Dull; GC, Broadcom Corp.; Options backdating
Source: American Bar Association Section Committee on Corporate Counsel, October 2007; updated with information from the SEC and DOJ.
In a follow-up story, Corporate Counsel looked at where the General Counsels of the stock option backdating in Silicon Valley have gone. Only three still have the same general counsel job, according to research by The Recorder, a sibling publication of Corporate Counsel. (Nine companies did not have a GC at the time, and one had two.) The biggest portion apparently are not practicing law anymore, or have retired. The Recorder made this determination based on multiple factors: Sources indicated that they were not practicing; some of these individuals are listed as inactive in their bar entries; their entries feature home phone numbers; they could not be found in recently filed publicly available information; and they did not return repeated requests for comment.
Still GC's at Same Company: 3
- Charles Rigg, the GC of Maxim Integrated Products, remains in the position
Same Company, Reassigned: 4
- Robert Donohue, the former GC of BEA, is now VP-legal
New GC Job: 7
- Stuart Nichols, the former GC of KLA-Tencor, is now general counsel of MIPS
- Susan Skaer, the former GC of Mercury Interactive, now sells real estate
Apparently not Practicing/Retired: 12
- Nancy Heinen, the former GC of Apple, is now fighting SEC charges
Unclear: 2 (no information was found about these GCs)