State Of The Industry After A Month Of Coronavirus

Episode Notes

Transcript

Above The Law – Thinking like A Lawyer

State Of The Industry After A Month Of Coronavirus

04/21/2020

[Music]

Intro: Welcome to ‘Thinking Like a Lawyer’ with your hosts Elie Mystal and Joe Patrice talking about legal news and pop culture all while thinking like a lawyer, here on Legal Talk Network.

Joe Patrice: Hello, welcome to another edition of ‘Thinking Like a Lawyer’. I am Joe Patrice from ‘Above The Law’ I am joined today by Kathryn Rubino, my colleague at ‘Above The Law’, how are you?

Kathryn Rubino: I am doing pretty good. How about yourself?

Joe Patrice: Not too bad, we are —

Kathryn Rubino: Dude, I mean —

Joe Patrice: Yeah.

Kathryn Rubino: I am exhausted. I guess that that’s far more accurate answer to the question how am I doing than a really bland generic, hi thanks, how about you?

Joe Patrice: Why, has it been like a busy news day or something?

Kathryn Rubino: It has been particularly busy today, that is correct.

Joe Patrice: So the subjects that we are going to cover today, this is going to be we don’t have a guest this week and we are going to talk because there’s nothing really else to talk about. We are going to cover a lot of the breaking news that we have dealt with which is largely about law firms and the cutbacks that many of them are making to deal with the — with what’s going on pandemic-wise, but we will also dance around some other topics. This is just be your general catch-up on what’s all COVID-related in the legal sphere.

Kathryn Rubino: I mean, only having to do one thing at a time kind of seems like a break right now.

Joe Patrice: Yeah. I actually just got off a media panel, I was part of Rocket Aid which was a charity trade show that was done all online because most of our legal technology trade shows have been canceled.

Kathryn Rubino: Like every trade show in the country.

Joe Patrice: I mean ILTA is still theoretically on, but it is in, I think August —

Kathryn Rubino: Well, it’s usually — yeah, as you said like in the end of August too.

Joe Patrice: Yeah. So I don’t know what exact dates it has. They have not canceled still holding out hope there, but a lot of the other shows have already gone by the wayside. So Rocket Matter put on Rocket Aid which was an online webinar-style show running for two days and I just did the media panel with some of our —

Kathryn Rubino: So what was a media panel all about, give us the synopsis?

Joe Patrice: We talked a lot about what we are hearing in the news and what it’s like to cover this; trends that we might be seeing as journalists that others aren’t. In a lot of ways a lot of what this conversation is going to be about I think. It’ll just be us and without having Bob Ambrogi here or Caroline talking about the England side of things, so it’ll just be us, but yeah.

So before we get to that one of the trends that Bob mentioned, actually Bob Ambrogi mentioned on this webinar was that an encouraging bit of news that he’s seen has been all of the legal technology vendors who are going out of their way to help there’s no better time than that to asking. Are you trying to cut costs? You are not alone. In today’s climate a five-figure e-discovery bill per month is steep. Don’t pay that. Use Logikcull to reduce expense and control your discovery process, get started today for only $250 per matter and they will wave migration costs from competing platforms. For more information visit logikcull.com/ltn. So you see how that —

Kathryn Rubino: Yeah, I mean —

Joe Patrice: It is —

Kathryn Rubino: It’s very —

Joe Patrice: Yeah, I mean, it fits seamlessly and that was —

Kathryn Rubino: It did.

Joe Patrice: I mean, I didn’t make that up, that was part of the conversation. You can watch the panel and all the other good panels, and not to say that mine wasn’t good but all of the other great panels happening have been recorded and you may be able to find those at the Rocket Aid site. So —

Kathryn Rubino: Yeah, that’s what — I mean obviously it’s a — to say it’s a tumultuous time, it’s a bit of an understatement, but you have to imagine that particularly for Legal Tech vendors that this is the time to prove your point. If there was ever — lawyers often get a reputation, probably deserve it for being Luddites and resistant to change, and that’s all fair, but nothing quite like the Rona to force you to do a lot of the stuff that you probably should have already been doing.

Joe Patrice: Yeah, and that came up too speaking about the UK side of things. I can’t remember if it’s JoAnn or Carolyn, but somebody on that panel pointed out that the resistance to change over there where it was discussed that it might take years to coax the courts into allowing this kind of technology to do this and that. It took two weeks for them to rewrite all their rules to adjust, and that’s something that would never have happened but for the necessity. So —

(00:05:15)

Kathryn Rubino: Yeah, I mean, I definitely think that’s — it’s an important lesson is that when you have to you actually can do these things.

Joe Patrice: Speaking of necessity unfortunately when it comes to the legal industry, you have been covering it seems as though some of these law firms are making cutbacks.

Kathryn Rubino: Oh yeah, hmm, hmm. Yeah, for several weeks now we have been running stories pretty much constantly about law firms that are cutting either — what I call the COVID-19 austerity measures sometimes they are pay cuts, sometimes they are benefits cuts, sometimes they are partner draw cuts —

Joe Patrice: Furloughs —

Kathryn Rubino: Furloughs — sometimes they are layoffs. So we have kind of seen — run the gamut and the firms that are being impacted you are seeing — and you have talked a little bit about, I know in the past kind of the distinction between the Am Law 100 and the Am Law 200 and sort of how it’s bifurcating the big law industry and certainly we have seen a lot of Am Law 200 firms kind of that 101 to 200 taking some pretty big hits and being really proactive about doing these cuts. But, the longer this goes on we are seeing more-and-more firms that have bigger-and-bigger revenue numbers making cuts. A couple of firms that have billion-dollar gross revenue numbers are still cutting salaries, and I don’t see any end to it.

Even firms that believe that they are on good financial fitting and probably are on good financial footing at the moment have no idea of really what the next month or so is going to bring, how long these things were going to last, what their collections will look like, what their clients’ industries are going to look like in a couple months? So a lot of this stuff is very much an open question.

Joe Patrice: Yeah, I think you hit on one word there that is really important is collections.

Kathryn Rubino: Yeah.

Joe Patrice: And I feel as though because some courts are closed and stuff like that, but the law hasn’t stopped, there are still things out there and there’s still in some ways it’s arguable that there’s more out there. There’s going to be bankruptcies, there’s going to be mergers and acquisitions with the market collapsing, there’s going to be private equity and fund work, these family offices, these folks who’ve been sitting on money because they felt the market was overvalued, they are going to start making deals and investments now, and that means lawyers are going to be working.

So it’s not as though the work has disappeared, so what is it that’s slowing down that’s triggering these austerity measures, and I really do think it’s a pay cycle issue, it’s —

Kathryn Rubino: For sure.

Joe Patrice: The clients have worked but they don’t know when they will get paid so they are dragging things out and it’s cascades.

Kathryn Rubino: Yeah, I think that’s definitely true. I can’t remember now my firms. I have written so many of these articles. I can’t remember exactly which firm it was, but one firm in we got somebody, a tipster sent a copy of the email or memo announcing the austerity measures and the firm was very upfront with their employees and said, compared to this month for last year our collections are down 17%, and that’s a really big hit, and so if we want — it’s a cash flow issue. From all the documents that we are seeing from a wide variety of firms really the concern is cash flow and cutting back on these partner draws were salaries, the biggest — one of the biggest overhead expenses that firms have, what does the law firm but it’s not as people.

So cutting back on those costs allow a lot of firms think that it’s going to allow them to have flexibility, and I think one of the key distinctions that we are seeing in this down-cycle versus the 2009 cycle, which was kind of the last big law set of layoffs is that, well, back in 2009 it was pretty much only layoffs, that was the go-to move for big law firms. You didn’t see folks really doing big salary cuts or partner cuts or furloughs even with the assumption that within a few weeks and/or months those employees will be hired back once demand is back.

But you didn’t really see those moves nearly as much as you’re seeing them now and I think that firms are trying to avoid wherever possible laying off and letting go folks for a bunch of reasons. I think that transparency in realizing that they have to deal with the recruiting hit that they are going to take if they have big layoffs as a big part of it.

(00:10:04)

But I also think that no one really wants to let people go during a pandemic, that seems particularly cruel. I think the economic impact is only part of what the world is going through right now.

Obviously it’s a big part, but it’s only part of what’s going on, so I think that folks are trying to come up with solutions and ways to make cuts that will keep people on their health insurance because of course without a national health insurance everyone’s health insurance is largely tied to their jobs and so no one wants to really force their employees to — or potentially former employees to be without during this time, and I think that they are trying to come up with more solutions.

Joe Patrice: Yeah. It’s true, and a lot a lot of these firms have said, as you pointed out that, they are cutting back now with an eye toward fixing that down the road when the collections come back in. There have been a few who have said, no, this is really a reduction, sorry. And that distinction which sometimes is hard to see off the top, people see salaries cut 15% and they just walk away, but there is a distinction I think that is important between firms that are telling us, we are cutting it but we expect to get it back versus those who say, oh no, this is a permanent cut.

Kathryn Rubino: Yeah, I think that — I think there’s actually a third kind of level of distinction. There are firms that are cutting salaries at the moment and saying we will do kind of make whole bonuses at the end of the year assuming our money is where we expect it to be at the end of the year. There are firms that are making cuts but those are only for a short amount of time.

Yes, it is not a deferral on payment, it is a cut in payments, but it is only we anticipate it only being from May through September. There are other ones that say it will be a cut in salary from now until we don’t know.

Joe Patrice: Right.

Kathryn Rubino: Or until at least the end of the year, I have seen that phrasing as well, and I think that kind of that third category where these are very much indefinite cuts, there are — and they are anticipated to be longer than some other places. I think those are the folks that long term are going to have smaller starting salaries.

Joe Patrice: A topic we haven’t broached much yet here, but I think is something to consider is that when we come out — start coming out of this run, I think a lot of those — well, you talked about the gap between the Am Law 100, I would say even maybe the Am Law 50 and the rest, when that starts moving I think what people aren’t talking about that’s going to happen are some of those 150 to 75 firms are going to start becoming attractive targets for mergers and takeovers. They are cash-strapped, they have good business, they have good books of business, good relationships with clients, but they are cash-strapped in a way that they aren’t going to be able to recover from in time to cover all of their expenses, and oh look, here comes another firm where similar issues are slightly better off, it’s on cash but not as good position with business, here’s a merger.

I think we could see a very different landscape among that lower part of the Am Law 100 to 200 than we do today. A lot of names will be shifted around, let’s say.

Kathryn Rubino: Yeah, I think that that’s very true. I think that there’s a lot of firms that have to change the way that they do business and that was probably true. It was just going to take a lot longer for them to kind of be forced into it, absent the pandemic, but for sure, I think that this has sped stuff up. Because I mean even, God willing, someone finds a vaccine tomorrow for COVID, awesome, wonderful, that’s what we are all — would love, but that doesn’t automatically kind of undo all of the economic impacts, right? And the way that the economy works and the way that — a lot of this stuff isn’t going to come back or will come back in a different form or — and there’s a lot of kind of shifting and if your firm is dependent on industries that have been radically or hit by this upheaval you are going to have to make some big changes.

(00:14:51)

Joe Patrice: Well, let’s transition here to the other half of the ‘Above The Law’ hallway, and we have been talking a lot about the law firm side, let’s talk a little bit about the not-yet law firm side, and by that, I mean, the Bar exam and licensing.

One of the issues to come out of this is, for any of you who’ve ever taken a Bar exam you probably sat within a foot-and-a-half of some other person that you didn’t know in a crowd of their house.

Kathryn Rubino: Not that you were cheating, let’s be clear.

Joe Patrice: Yeah, and that’s something that probably you can’t do in July, and for that reason the Bar exams across the country are largely canceling. If they haven’t done it yet, they are about to cancel their July administrations. They are eyeing some dates in September, but even at that they are starting to worry that they won’t have the ability to put people together in quite the same numbers as they have before, both because there will still be some lingering concerns, also there — even if there aren’t, there are issues with the locations.

They have booked certain convention halls in July and they are not available in September or whatever and there are just many reasons why the Bar exam is facing some real problems and may not be able to get everyone handled in September, even if they could do a September session, which September sessions also raise knock on effects, you can’t necessarily go to Town Hall which is a venue in New York, which is where I certainly did my Bar prep. You can’t pack that venue and the Bar, even though it’s not necessarily beholden to Bar prep courses, has to take into account that the Bar prep courses are going to need their time to meet with everybody and go through their curriculum.

So with that said, we enter a weird place where the Bar exams, in particular speaking mostly through the NCBE who administers the tests that everybody around the country basically takes, are making the argument that we are going to charge forward with this anyway and a lot of students and faculty have raised well, maybe we shouldn’t try to —

Kathryn Rubino: What if we didn’t?

Joe Patrice: — force this through.

And it’s been interesting and I think the most recent example here is that Utah appears poised to join Wisconsin who has been doing it since like 1870 or something like that, but Utah is preparing to join at least temporarily, but obviously toothpaste in the tube situations, at least temporarily abandoning the Bar exam altogether for the current class and saying if you were supposed to be taking the July Bar exam and you went to law school and graduated, congratulations, the subject matter portion of admission, the Bar exam portion of admission, we are going to take your law school diploma as enough on that and now kindly turn in your professional responsibility stuff and character and fitness and we will start evaluating that.

Kathryn Rubino: I don’t know man. It sounds — you obviously cover the law school industry a lot more than I cover it, but it I think that there is a fair question about, particularly with so many law school — any given state’s Bar passage rate is not 100%. If there was ever a value in saying that those folks were not qualified at that point to practice law, I mean that hasn’t gone away, right?

Joe Patrice: True, but the question of the efficacy of the exam has always been there. I think there is a two-pronged answer to this. The first prong is the efficacy of it has always been an issue. I mean we had Quinn Emanuel named partner, Dean of Stanford Law School failing Bar exams, right?

Kathryn Rubino: Sure, sure, well, I mean —

Joe Patrice: As an adult Supreme Court litigator failing a Bar exam. That’s a testament to a problem with the way in which we test. There are other problems with the way in which we test. And one argument and we had an article about this when the NCBE wrote a letter trashing the idea of letting people just get in with their diploma, the NCBE in this letter begins by saying that the value is and the reason the Bar exam is better than any law school diploma is that the law schools have a bunch of essay questions graded by professors, but we are multiple-choice and multiple-choice is better.

Kathryn Rubino: Well, that seems inaccurate.

Joe Patrice: Fast forward — well, I mean it makes it more reliable. Well, fast forward three pages in the same letter and when they deal with the criticism that there is a disproportionate passage rate, in particular there is a racial component to it, but there is also a disproportionate pass rate among men taking the test and women, they say oh, that’s just because men statistically do better on multiple-choice tests. Well, then that’s a problem with relying on multiple choice tests, isn’t it?

(00:20:10)

Kathryn Rubino: Yeah. The other thing is being a lawyer is not a multiple-choice problem. It is far more akin to a long, long, long essay question.

Joe Patrice: Exactly, and that’s the issue, I feel as though what the results of the Bar exam are, especially given the over-reliance on multiple-choice are not necessarily representative of the capacity to be a lawyer in the same way that passing law school is, where you do have years worth of doing essays.

On the flip side of that of course is that you are right. There are law schools out there who are bad at what they do, who take students who probably aren’t prepared to be lawyers, churn them through, take their money and then go out and they fail the Bar exam. And a lot of that, my argument, which obviously doesn’t address the temporary extension of diploma privilege and as far as its temporary extension, I think it is A, because it is a very difficult time and therefore it’s kind of a one-off, but B, it does have to and there has been some good work done on this in a paper that a number of law professors contributed to on diploma privilege plus, a situation where it’s not just that you have your law degree, but you also then have to go through an apprenticeship style program under the supervision of an admitted attorney to make sure you really are up to it.

And frankly, I think that’s useful in that I think there is a high likelihood we are going to see some of these students who might not be ready to practice; the issue being not more subject matter help, but more practical skills and maybe they will be better served by this sort of situation.

Additionally, more rigorous CLE requirements for people who go through this to make sure that they are staying up to some more tests rather than just like oh, I watched it, click, but something to keep guaranteeing that the progress is being made. So I think that that all is key for the short-term.

In the longer term though, I do believe that a lot of these bad diploma mill schools get away with what they do because regulators don’t have the incentive and they are not empowered by the usually Supreme Courts of states to really crack down on these schools because everybody kind of shrugs and says well, we will sort it out at the Bar exam, and that’s really an unfortunate place to pipeline a bunch of students who aren’t going to pass the exam, but don’t worry, we will wait until after they have spent $150,000, $200,000 before we tell them that they aren’t ready, that’s bad.

And I think that if we move to something more akin to this diploma privilege plus, we would have a situation like they have in Wisconsin who has been again doing this for over a 100 years where the state regulators are involved in ensuring that the law schools who are eligible for that; Marquette Wisconsin, the Wisconsin law schools have a curriculum that reflects what — a required curriculum that reflects what’s necessary, accreditation standards that ensure that they are pumping out people who are going to do the job and protect the public. And I think that if we can move towards an incentive to fix the law schools in the first place, that’s probably better than continuing to have diploma mills and saying yeah, we will have a test later.

Kathryn Rubino: Well, yeah, I mean it seems to me like these are big changes that may not be resolved just because of — and certainly can’t be resolved on this quick of a turnaround, right, like to really change legal education, that takes several years at least to implement.

Joe Patrice: You say that, on the other hand, there is something to be said for how we began this conversation, right?

Kathryn Rubino: Sure, sure.

Joe Patrice: We began by talking about courts who said they wouldn’t change for years, certain practices, doing it in two weeks and there is something to the crisis and I feel as though obviously no one is really talking and no one important; I mean I am, but no one important is talking, no one in a position of power, how about that, I am not saying I am not important, but no one in a position of power is talking about these becoming permanent changes, but there is that impulse that this is an opportunity to do some experimentation. We have to make a temporary solution. This is a fair temporary solution, but we get now to track that solution over time and really ask ourselves, do we need licensing to exist the way we currently have it or do we just do that because that’s what we did last year and the year before that.

Are we just blind to tradition and just doing this when it’s not really the best way to ensure that the lawyers out there meet the minimum level of competency and protecting the public.

(00:25:10)

Kathryn Rubino: I think that that is also a distinction, right? This is not — it doesn’t matter if you get an A+ on the Bar exam, right, it’s a floor, not a ceiling?

Joe Patrice: Yeah, outside of the novel The Firm, it does not matter. That was the whole point there. He got that cushy job because he got the highest score on the Bar exam, as though that’s a thing.

Kathryn Rubino: Fair, fair enough.

Joe Patrice: Anyway. But no, that was our catching up on Bar exam stuff. There is also a little bit of a thing, I don’t want to belabor it too much, but there is obviously issues with law schools and how they are going to deal with grades this semester. Pretty much everybody has moved to a mandatory pass/fail blanket system for all of the grades this semester.

Kathryn Rubino: Not quite everyone though, right?

Joe Patrice: Not quite, not quite. There are a few holdouts, different kinds of holdouts. Notre Dame and Baylor now are doing an optional system where you can say oh, now I want those to be pass/fail or actually before a grading say oh, I have decided I am going to make these pass/fail as opposed to it being blanket. There are reasons why I don’t think that’s a particularly well thought out plan that I have covered in some articles. It seems as though you are projecting to potential employers that a certain segment of your population who may be claiming pass/fail for a variety of reasons, you put them in a position of standing out versus the other people in the class for reasons that may or may not actually be reflected by their actual achievement. So it doesn’t make any sense.

It also strikes me as largely stupid to the extent that we have a long time in law — many semesters in law school to figure out how people are good at what they do and we don’t mean to — the death drive to we have got to have a class rank can stop.

We can all recognize and we have had Supreme Court justice from Texas put out a tweet just assuring everybody. He is like for whatever it’s worth I am not going to be caring about this semester when it comes to choosing clerks. And I think that’s more representative of where employers and judges are at this point and the way in which certain schools and certain states, in particular Georgia, where the schools themselves don’t control it, but the people who work for the governor, the same governor who tried to keep the state open forever and thought that the disease wasn’t spreadable, that guy, those political appointees are keeping it from being pass/fail as part of their commitment to this PR game.

Kathryn Rubino: It’s a hoax, right?

Joe Patrice: Yeah. They have turned away from it being a hoax, but they are still doing whatever they can to smooth it out and pretend it’s not what it is. So that’s where they are. Anyway.

But that’s what’s going on in the law school world. There is not a ton more to say there. There are a few holdouts, but most everybody has come around to mandatory pass/fail, certainly all the T14. We talked a few weeks ago about this particular issue; at that point Chicago was still a holdout. I said they would not be —

Kathryn Rubino: That is correct.

Joe Patrice: I said they would not be for long and they were not.

But yeah, so that’s what’s going on in law school. So we have covered basically all the phases of our industry right now. Even legal tech we covered. Tech, law firms, law schools, the Bar.

Kathryn Rubino: This is what we do.

Joe Patrice: Yeah. So it’s been a very, very busy set of weeks at Above the Law. We have been churning out content at a higher rate than usual.

Kathryn Rubino: Yes. If you think that there are more stories, you are not wrong. There are a lot more stories than there typically are and we are writing them kind of fast and furious. I actually had a PR person who represents a couple of firms reach out to me and say, I don’t know how you guys are doing it. I only handle a few firms and you have at least 40 or 50 firms you care about. I am like, I have no idea what I wrote yesterday, like I cannot remember what firms did what. It’s all written down somewhere and I knew it at the moment, but after it’s written I have got nothing.

Joe Patrice: Yeah, you have got a turn — I mean it’s the litigator mindset, right, like you learn a lot about something real fast and then when it’s over you have to dump all that and learn a new thing, new industry, yeah it’s true. But we have been putting out a lot. You should obviously be reading that at abovethelaw.com.

(00:30:02)

Another way in which you can keep on top of those stories is we have a newsletter, both a daily newsletter that covers some of the key stories that we have, but also we have an alerts newsletter that you can sign up for, for just announcements about salary changes and cuts and stuff like that.

You can just follow the Twitter account, which is @atlblog, which means that you would get notifications when new stories go up. You just get the headline and then a link, so it gives you an opportunity to see that headline and go oh, I want to read that one and you can just click. Obviously it’s easier if you not only follow, but then have us in your notifications or in a separate list so you can see when new things happen.

Does that make sense everybody? Cool.

Kathryn Rubino: Makes sense to me.

Joe Patrice: Yeah, excellent. And then you can also of course follow along with us. I am @JosephPatrice, she is @Kathryn1, not the word numeral, but like numeral, Kathryn1. So you should be following along with us.

Thanks for listening to the podcast. And you should be subscribed, that way you get this sent to you whenever it comes out. You also should be giving reviews, stars, write some things, it’s even more important than the star because it helps show that there is engagement and that helps move up the algorithms on all those recommendation charts.

You should be reading Above the Law. I said you should be listening to us, you should be listening to The Jabot, which is the podcast that you host independently.

Kathryn Rubino: I do indeed.

Joe Patrice: You should be listening to the other offerings of the Legal Talk Network. You should be moving over to Logikcull, which we already covered in the ad read and I think that’s everything.

Kathryn Rubino: Stay safe everybody.

Joe Patrice: Indeed. We will be back next week.

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