NY TIMES OP-ED FOLLOW UP

My August 25 Op-Ed in The New York Times went viral. It became number one on the Times’ “most-emailed” list. It rose to the top-five in “most viewed,” “most shared on Facebook,” and “most tweeted.” Within hours of publication, it generated more than 600 comments.

It also produced letters to the editor, three of which the Times chose to publish on September 2. Two are from law professors whose responses reveal why the current crisis in legal education is so intractable.

Letter #1

Milan Markovic is an associate professor of law at Texas A&M. He argues that current law students will soon have better job prospects because there are fewer of them:

“Not all of these students will graduate and pass the bar, but those who do will face much less competition for legal jobs even if the economy fails to improve.”

Professor Markovic perpetuates the sloppy analysis infecting virtually all academic discussion about law student debt and the crisis in legal education. In particular, his macroeconomic prediction about the fate of future graduates ignores a crucial fact: job opportunities vary dramatically according to school.

A 2018 graduate from Professor Markovic’s school — Texas A&M — will not have employment prospects comparable to students at top schools that regularly place more than 90 percent of their new graduates in full-time long-term bar passage-required positions. In that key category, Texas A&M’s employment rate for 2014 graduates was 52 percent.

Likewise, only three Texas A&M graduates in the class of 2014 began their careers at firms where attorney compensation is highest (that is, firms with more than 100 lawyers). Like the JD-required employment rate, big firm placement is another indicia of a school’s relevant market. That’s not a value judgment; it’s just true.

In fact, Professor Markovic is a living example of the distinct legal education submarkets. In 2006, he graduated from the Georgetown Law Center, which placed 281 of its class of 2014 graduates — more than Texas A&M’s entire 232-member class — in firms of more than 100 lawyers. Before Professor Markovic began teaching in 2010, he spent four years as an associate in two big law firms — Sidley Austin and Baker & Hostetler.

Let’s Run the Experiment

Professor Markovic objects to introducing law school accountability for employment outcomes. He argues that any reduction in federal funding “will not lead to less demand for law school or other graduate programs. Rather, students will turn to the private loan market, and private lenders will be only too happy to lend because graduate school loans — and particularly those allocated to law students and medical students — have historically been very profitable.”

Let’s run that experiment. But first, let’s create something resembling a functional market for legal education. Start by adopting my proposed sliding scale of federal loan guarantees based on each individual law school’s employment outcomes. In such a system, a school’s poor job prospects would mean a reduced loan guarantee amount for its students. Then implement one more change to the present regime: make law school debt dischargeable in bankruptcy.

Will private lenders be “only too happy” to make six-figure loans to students at any marginal law school, including places where fewer than half of graduates are finding jobs requiring a JD? Let a real market decide.

Letter #2

Professor Jeremy Paul is dean at Northeastern University School of Law. His letter to the Times editor notes correctly that many Americans cannot afford legal services and analogizes the situation to doctors.

“No one would say we had an oversupply of medical students if millions of Americans resorted to self-medication and treatment because they could not pay for a doctor,” he writes.

One commenter to Tax Prof Blog countered Professor Paul’s analogy with this one: “How can anyone say there are too many restaurants when there are still so many starving and malnourished people in the world? That’s how 12-year-olds think, not lawyers, which I’ve heard is law school’s reason for being.”

For the indigent needing legal services, there are not enough lawyers. But that’s because our society isn’t willing to pay for them. Based on the funding trends for the Legal Services Corporation and the federal government’s current obsession with austerity, the future in that respect is bleak. Compared to 1985, Congressional appropriations to the LSC are down 50 percent (in constant 2013 dollars).

Other than complain about the government’s failure to make the universal right to counsel in civil cases a priority, I can’t do anything about that problem. Neither can Professor Paul. But politicians’ reluctance to fund legal aid positions does not justify burdening today’s graduates with enormous educational debt for a JD that won’t lead to a paid position requiring that degree.

Experiments with Other People’s Student Loan Money

Professor Paul also observes that some law schools and bar associations are launching “incubator programs aimed at helping law graduates to serve clients of modest means.” That’s true. I was on the committee that developed such a program with the Chicago Bar Foundation. Will they result in more solo practitioners who, over the long-term, can squeeze out a living and a satisfying legal career? No one knows. But the participants in those programs are a drop in the bucket compared to the vast numbers of law graduates annually who can’t find JD-required jobs.

Like Professor Markovic, Dean Paul knows there’s no unitary legal education market. He graduated from Harvard Law School in 1981. For Northeastern Law School — where he has been dean since 2012 — the full-time long-term bar passage-required employment rate for the class of 2014 was 53 percent.

Completing the Circle

Professor Paul’s final observation is that “studies show that a law degree remains a sound investment…”

Which takes us back to the pervasive and persistent academic canard that aggregate data matter to individual decisions about attending particular schools. What study tracks outcomes by individual law school to “show that a law degree remains a sound investment” for graduates of every school?

No such study exists. But for those determined to resist necessary change in the broken system for funding legal education, magical thinking combines with confirmation bias to trump reality every time. Federal student loan subsidies unrelated to student outcomes encourage otherwise thoughtful legal academics to become unabashed salespeople.

Think of it as your tax dollar at work.

Would Professor Markovic and Dean Paul — among many others who similarly ignore the crisis in legal education — counsel their own children to attend a marginal law school that, upon graduation, assured them of six-figure debt but offered only dismal JD-required employment prospects? It probably depends on how they feel about their kids.

2015: THE YEAR THAT THE LAW SCHOOL CRISIS ENDED (OR NOT) — CONCLUSION

My prior two installments in this series predicted that in 2015 many deans and law professors would declare the crisis in legal education over. In particular, two changes that have nothing to do with the actual demand for lawyers — one from the ABA and one from the Bureau of Labor Statistics — could fuel false optimism about the job environment for new law graduates.

Realistic projections about the future should start with a clear-eyed vision of the present. To assist in that endeavor, the Georgetown Law Center for the Study of the Legal Profession and Thomson Reuters Peer Monitor recently released their always useful annual “Report on the State of the Legal Market.”

The Importance of the Report

The Report does not reach every segment of the profession. For example, government lawyers, legal aid societies, in-house legal staffs, and sole practitioners are among several groups that the Georgetown/Peer Monitor survey does not include. But it samples a sufficiently broad range of firms to capture important overall trends. In particular, it compiles results from 149 law firms, including 51 from the Am Law 100, 46 from the Am Law 2nd 100, and 52 others. It includes Big Law, but it also includes a slice of not-so-big law.

The principal audience for the Georgetown/Peer Monitor Report is law firm leaders. The Report’s advice is sound and, to my regular readers, familiar. Rethink business models away from reliance on internally destructive short-term metrics (billable hours, fee growth, leverage). Focus on the client’s return on investment rather than the law firm’s. Don’t expect a reprise of equity partner profit increases that occurred from 2004 through 2007 (cumulative rate of 25.6 percent). Beware of disrupters threatening the market power that many firms have enjoyed over some legal services.

For years, law firm leaders have heard these and similar cautions. For years, most leaders have been ignoring them. For example, last year at this time, the Georgetown/Peer Monitor Report urged law firm leaders to shun a “growth for growth’s sake” strategy. Given the frenzy of big firm merger and lateral partner acquisition activity that dominated 2014, that message fell on deaf ears.

The Demand for Lawyers

The 2015 Report’s analysis of business demand for law firm services is relevant to any new law graduate seeking to enter that job market. Some law schools might prefer the magical thought that aggregate population studies (or dubious changes in BLS methodology projecting future lawyer employment) should assure all graduates from all law schools of a rewarding JD-required career. But that’s a big mistake for the schools and their students.

For legal jobs that are still the most difficult to obtain — employment in law firms — the news is sobering. While demand growth for the year ending in November 2014 was “a clear improvement over last year (when demand growth was negative), it does not represent a significant improvement in the overall pattern for the past five years.”

In other words, the economy has recovered, but the law firm job market remains challenging. “Indeed,” the Report continues, “since the collapse in demand in 2009 (when growth hit a negative 5.1 percent level), demand growth in the market has remained essentially flat to slightly negative.”

Past As Prologue?

The Report notes that business spending on legal services from 2004 to 2014 grew from about $159.4 billion to $168.7 billion — “a modest improvement over a ten-year period. But if expressed in inflation-adjusted dollars, the same spending fell from $159.4 to $118.3 billion, a precipitous drop of 25.8 percent.”

What does that mean for future law graduates? The Report resists taking sides in the ongoing debate over whether the demand for law firm services generally will rebound to anything approaching pre-recession levels. It doesn’t have to because, the Report concludes, “it is increasingly clear that the buying habits of business clients have shifted in a couple of significant ways that have adversely impacted the demand for law firm services.”

One of the two shifts that the Report identifies doesn’t necessarily mean less employment for lawyers generally. Specifically, companies are moving work from outside counsel to in-house legal staffs. That should not produce a net reduction in lawyer jobs, unless in-house lawyers become more productive than their outside law firm counterparts.

The second trend is bad news for law graduates: “[T]here has also been a clear — though still somewhat modest — shift of work by business clients to non-law firm vendors.” In 2012, non-law firm vendors accounted for 3.9 percent of legal department budgets; it grew to 7.1 percent in 2014.

Beware of Optimistic Projections

The Georgetown/Peer Monitor Report is a reminder that the recent past can provide important clues about what lies ahead. For lawyers seeking to work in firms serving corporate clients, it sure doesn’t look like a lawyer shortage is imminent.

So what will be the real-life source of added demand sufficient to create market equilibrium, much less a true lawyer shortage? Anyone predicting such a surge has an obligation to answer that question. As the Report suggests, general claims about population growth or the “ebb and flow” of the business cycle won’t cut it. Along with the rest of the economy, the profession has suffered through the 2008-2009 “ebb.” The economy has returned to “flow” — but the overall demand for lawyers hasn’t.

Here are two more suggestions for those predicting a big upswing from recent trends in the demand for attorneys. Limit yourselves to the segment of the population that can actually afford to hire a lawyer and is likely to do so. Then take a close look at individual law school employment results to identify the graduates whom clients actually want to hire.

THE BINGHAM CASE STUDY: PART II

Starting with the introduction, Harvard Law Professor Ashish Nanda’s case study on Bingham McCutchen depicts Jay Zimmerman as the architect of the firm’s evolution “from a ‘middle-of-the-road-downtown-pack’ Boston law firm in the early 1990s to a preeminent international law firm by 2010”:

“Zimmerman was elected chairman in 1994. Over the next 15 years, he shepherded the firm through 10 mergers, or ‘combinations’ in the Bingham lexicon, the establishment of 11 new offices, and a ten-fold increase in the firm’s revenues to $800 million… Given its impressive expansion, [journalist Jeffrey] Klineman said, ‘Bingham McCutchen has shown it could probably open an office on the moon.'” (p. 1)

Harvard published the study in September 2011.

Another Case Study

Ten months later, Nanda released another case study, “The Demise of Howrey” — a firm that was dying as he considered Bingham. Interestingly, several footnotes in the Howrey study refer to articles explaining how aggressive inorganic growth compromised that firm’s cohesiveness and hastened its collapse. (E.g., “Howrey’s Lessons” by me, ““Why Howrey Law Firm Could Not Hold It Together”, by the Washington Post’s Steven Pearlstein, and “The Fall of Howrey,” by the American Lawyer’s Julie Triedman) But Nanda’s 15-page narrative of Howrey barely mentions that topic.

Instead, he invites consideration of “the alternative paths Howrey, and managing partner Robert Ruyak, might have taken to avoid dissolution of the firm” after that growth had occurred. The abstract concludes with these suggested discussion points:

“What could Howrey have done differently as clients demanded contingency payment plans and deep discounts? Should Ruyak have been more transparent about the financial difficulties the firm faced? Should he have consulted with a group of senior partners instead of relying on the counsel of outside consultants? Is a litigation-focused firm at a disadvantage when it comes to leadership, as compared to a corporate practice? Participants will reflect on the leadership structure of Howrey while discussing issues related to crisis management.”

With all due respect, those inquiries don’t reach a key lesson of Howrey’s (and now Bingham’s) collapse. The following sentence in the study does, but it goes unexplored:

“Howrey continued to add laterals over the concerns of some partners that increased lateral expansion might detract from the firm’s strategic focus and weaken its cultural glue.” (p. 6)

The Metrics Trap

Nanda’s case studies report that at Howrey. as at Bingham, a few key metrics suggested short-term success: revenues soared, equity partner profits increased, and Am Law rankings went up. But beneath those superficially appealing trends was a long-term danger that such metrics didn’t capture: institutional instability. When Howrey’s projected average partner profits dipped to $850,000 in 2009, many ran for the exits and the death spiral accelerated.

Likewise, Bingham’s record high equity partner profits in 2012 of $1.7 million dropped by 13 percent — far less than Howrey’s 2009 decline of 35 percent — to $1.5 million in 2013. But a steady stream of partner departures led to destabilization and a speedy end.

Balancing the Presentation

According to the final sentence of the Bingham case study abstract, “The case allows participants to explore the positives and negatives of following a strategy of inorganic growth in professional service firms….”

The negatives now dwarf the positives. No one should fault Nanda for failing to predict Bingham’s collapse two years later. The most spectacular law firm failures have come as surprises, even to many insiders at such firms. But the Bingham study emphasizes how Zimmerman conquered the challenges of an aggressive growth strategy, with little consideration to whether the overall strategy itself was wise over the long run.

For example:

— The study notes that after Bingham’s 2002 merger with 300-attorney McCutchen Doyle, “Cultural differences…loomed over the combined organization….” But the study goes on to observe, “[T]hese issues did not slow the firm’s growth on the West Coast.” (p. 11) By 2006, “Bingham had achieved remarkable success and unprecedented growth.” (p. 14)

— The study reports that the firm’s American Lawyer associate satisfaction ranking improved from 107 in 2007 to 79 in 2008, which Bingham’s chief human resources officer attributed to “an appreciation for the leadership of the firm. People have confidence in Jay’s competence.” (p. 17). The study doesn’t mention that the firm’s associate satisfaction ranking dropped to 100 in 2009 and to 106 (out of 137) in 2010. (American Lawyer, Sept. 2010, p. 78)

— “Our management committee has people from all over,” the study quotes Zimmerman. “You don’t have to have been at Bingham Dana forever to lead at the firm.” (p. 15) But the study doesn’t consider how too many laterals parachuting into the top of a firm can produce a concentration of power and a problematic distribution of partner compensation. When Bingham began to unravel, the spread between its highest and lowest paid partners was 12:1.

— Bingham’s final acquisition — McKee Nelson — was the largest law firm combination of 2009. The study doesn’t discuss the destructive impact of accompanying multi-year compensation guarantees that put some McKee Nelson partners at the very top of the Bingham McCutchen pay scale. To be fair, Nanda probably didn’t know about the guarantees, but the omission reveals the limitations of his investigation. The guarantees came to light publicly when the American Lawyer spoke recently with former partners who said that “the size and scope of the McKee Nelson guarantees led to internal fissures…that caused at least some partners to leave the firm.”

No Regrets

Looking to the future, Zimmerman told the Harvard researchers, “[W]e’re competing with the best every day. We know we are among the best.” (p. 19)

I wonder if he would now offer the same self-assessment of his leadership that Robert Ruyak provided to the American Lawyer at the time of Howrey’s bankruptcy, namely, “I don’t have any regrets.” Nanda’s case study on Howrey’s demise concludes with “Ruyak’s Reflections.” The “no regrets” line could lead to interesting classroom discussions about accepting responsibility, but it doesn’t appear in the Howrey study. Ruyak’s explanations for the firm’s failure do.

One explanation that receives no serious attention in the case study is Ruyak’s observation that the partnership lacked patience and loyalty to the firm: “The longer-term Howrey people realized that our profitability jumped around a bit,” he said. “The people who were laterals, maybe, did not.” (p. 15)

Perhaps the potential for institutional instability that can accompany aggressive inorganic law firm growth receives greater emphasis in classroom discussions of Howrey and Bingham than it does in Nanda’s written materials. In that respect, both firms are case studies in management failure that is regrettably pervasive: a wrongheaded vision of success and a reliance on misguided metrics by which to measure it.

THE BINGHAM CASE STUDY — PART I

“For the first time since I’ve been in this job, we have all the pieces we need to do our job.”

That was former Bingham McCutchen chairman Jay Zimmerman’s penultimate line in the September 2011 Harvard Law School Case Study of his firm.

Oops.

Harvard Law School Professor Ashish Nanda and a research fellow developed the study for classroom use. According to the abstract, it’s a textbook example of successful management. It demonstrates how a firm could evolve “from a ‘middle-of-the-downtown pack’ Boston law firm in the early 1990s to a preeminent international law firm by 2010.”

Oops, again.

Familiar Plaudits

At the time of Nanda’s study, the profession had already witnessed a string of recent big firm failures. He should have taken a closer look at them. In fact, only seven months before publication of the Harvard Study, Howrey LLP was in the highly publicized death throes of what was a preview Bingham’s unfortunate fate.

Bingham’s Zimmerman and Howrey’s last chairman, Robert Ruyak, had several things in common, including accolades for their leadership. Just as Nanda highlighted Zimmerman’s tenure in his study, two years before Howrey’s collapse, Legal Times honored Ruyak as one of the profession’s Visionaries. Along similar lines, less than a month after publication of the Harvard study, Dewey & LeBeouf’s unraveling began as partners learned in October 2011 that the firm was not meeting its revenue projections for the year. But Dewey chairman Steven Davis continued to receive leadership awards.

Perhaps such public acclaim for a senior partner is the big firm equivalent of the Sports Illustrated curse. Being on the cover of that magazine seems to assure disaster down the road. (According to one analyst, the SI curse isn’t the worst in sports history. That distinction belongs to the Chicago Cubs and the Billy Goat hex. But hey, anyone can have a bad century.)

Underlying Behavior

The Lawyer Bubble investigates Howrey, Dewey, and other recent failures of large law firms. The purpose is not to identify what distinguishes them from each other, but to expose common themes that contributed to their demise. With the next printing of the book, I’m going to add an afterword that includes Bingham.

If Nanda had considered those larger themes, he might have viewed Bingham’s evolution much differently from the conclusions set forth in his study. He certainly would have backed away from what he thought was the key development proving Bingham’s success, namely, aggressive growth through law firm mergers and lateral hiring. He might even have considered that such a strategy could contribute to Bingham’s subsequent failure — which it did.

To find those recent precedents, he need not have looked very far. Similar trends undermined Howrey, Dewey, and others dating back to Finley Kumble in 1988. As a profession, we don’t seem to learn much from our mistakes.

The MBA Mentality Strikes Again

What caused Professor Nanda to line up with those who had missed the fault lines that had undone similar firms embracing the “bigger is always better” approach? One answer could be that he’s not a lawyer.

Nanda has a Ph.D in economics from Harvard Business School, where he taught for 13 years before becoming a professor of practice, faculty director of executive education, and research director at the program on the legal profession at Harvard Law School. Before getting his doctorate, he spent five years at the Tata group of companies as an administrative services officer. He co-authored a case book on “Professional Services” and advises law firms and corporate inside counsel.

It’s obvious that Nanda is intelligent. But it seems equally clear that his business orientation focused him on the enticing short-term metrics that have become ubiquitous measures of success. They can also be traps for the unwary.

In Part II of this series, I’ll review some of those traps. Nanda fell into them. As a consequence, he missed clues that should have led him to pause before joining the Bingham cheerleading squad.

Meanwhile, through December 6, Amazon is offering a special deal on my novel, The Partnership: It’s FREE as an ebook download. I’m currently negotiating a sale of the film rights to the book.

THE ROBERTS COURT — PLAYING THE LONG GAME

It seems that everyone is trying to divine insights into how Chief Justice John Roberts is shaping the United States Supreme Court’s legacy. On July 2, The New York Times and The Wall Street Journal devoted front-page stories to that subject. On July 7, the Times published a review of Uncertain Justice, a book about the Roberts Court by pre-eminent constitutional scholar and Harvard Law Professor, Laurence Tribe, an unapologetic liberal.

While reading the review of Professor Tribe’s book, I recalled a January 2012 interview during which Stephen Colbert asked him about Roberts, who had taken his constitutional law course.

Tribe quipped, “I’m not sure how much of what I taught actually made a difference.”

All this is of special interest to me because Chief Justice Roberts was my law school classmate, and because I was in Professor Tribe’s course, too.

Activism v. Restraint

The Times story offers the Court’s unanimous rulings as a sign that the Chief Justice is sensitive to accusations that it has become an extension of the country’s paralyzing political polarization. The WSJ made a similar point in quoting from Roberts’ 2005 confirmation hearings on the subject of “judicial modesty”: “You don’t obviously compromise strongly held views, but you do have to be open to the considered views of your colleagues.”

Neither newspaper mentions other things that Roberts said during his confirmation hearings, including this: “Judges are like umpires. Umpires don’t make the rules; they apply them. The role of an umpire and a judge is critical. They make sure everybody plays by the rules. But it is a limited role. Nobody ever went to a ballgame to see the umpire.”

Conservatives bemoaning “activist judges” loved that analogy. For trial judges ruling on the admissibility of evidence, it may be reasonable. For a Chief Justice of the United States Supreme Court, it bears little resemblance to reality, as Roberts’ own actions on the Court have proven.

Tactics v. Strategy

In assessing Chief Justice Roberts’ approach, it’s worth distinguishing strategy from tactics. He is playing a long game. Although already on the Court for nine years, he could serve for twenty more. Tactically, he can move slowly in his desired direction. Over time, his strategic vision becomes more evident.

Jeff Shesol, the Times reviewer of Professor Tribe’s book, suggests that some elements of that vision are already in place, including the elimination of meaningful campaign finance limits, reduced regulation of economic activity, and erosion of long-established protections in civil rights, consumer rights, and criminal procedure.

The Journal quotes Cornell Law Professor Michael Dorf’s example of the interplay between tactics and strategy. In 2009, the Chief Justice issued an opinion “that upheld the toughest parts of the Voting RIghts Act of 1965, while opening new exemptions from federal oversight…. Four years later, Chief Justice Roberts, joined by his fellow four conservatives, built on the groundwork he had laid in 2009 by sweeping aside Voting Rights Act oversight that had been in place since 1965. All four liberals dissented.” (Professor Dorf chides the liberal justices as “naive” in lending Roberts their votes periodically, but what’s their second choice?)

More to Come

The Roberts Court has laid other foundational elements that could have a dramatic impact on American society. For example, most liberals were relieved when Chief Justice Roberts provided the deciding fifth vote upholding the Affordable Care Act (“Obamacare”). He found common ground with the majority in the federal government’s taxing power.

But on a key issue, he joined the dissent, which resurrected a moribund position on another critical constitutional source of the federal government’s power. As Jeff Shesol observes in his review of Uncertain Justice, Roberts joined a dissent that “took the most constrictive view of federal power under the commerce clause in 75 years, since the New Deal-era court got out of the business of overseeing economic policy.” In other words, the stage is set for a five-man Supreme Court majority to reverse a longstanding jurisprudential justification for federal legislation.

Professor Tribe Was Wrong

Whether the Roberts Court produces positive or negative outcomes for the country depends, of course, on an individual’s political views. The incontrovertible point is that, notwithstanding Professor Tribe’s offhand comment to Stephen Colbert, Chief Justice Roberts learned quite a bit from the course that we took.

Here are a few of the lessons: characterizing an issue can be critical in determining its outcome; one person’s judicial activism is another’s judicial restraint; one person’s liberty can compromise another’s freedom; a tactical loss today can lead to a strategic victory tomorrow.

The Justices of the United States Supreme Court are not merely umpires. They set the rules by which everyone else plays. Chief Justice Roberts is playing a very long game.

A CASE OF MOTIVATED REASONING

A recent survey, “What Courses Should Law Students Take? Harvard’s Largest Employers Weigh In?” by Harvard Law School Professors John Coates, Jesse Fried, and Kathryn Spier, has assumed a life that its sponsors never intended. For example, a recent Wall Street Journal headline implies that the survey provides a roadmap to success: “Want to Excel in Big Law? Master the Balance Sheet.” Likewise, some cite the survey in taking unwarranted shots at proposals to make law school more experiential.

Such misinterpretations of the Harvard survey might spring from a condition that psychologist Stephan Lewandowsky would call motivated reasoning: “the discounting of information or evidence that challenges one’s prior beliefs accompanied by uncritical acceptance of anything that is attitude-consonant.” In other words, people often see what they want to see, even when it isn’t there.

The HLS survey

Harvard sought curriculum input from an important constituency, namely, some big law firms. The questionnaire went to 124 practicing attorneys at the 11 largest employers of Harvard graduates in recent years, including my former firm Kirkland & Ellis. Among the respondents were 52 litigators, 50 corporate/transactional attorneys, and 22 regulatory practitioners. The tiny non-random sample is not even a representative slice of a typical big law firm practice.

Harvard didn’t ask attorneys to identify law school courses that might improve a student’s chances of getting a job. It couldn’t. The 11 firms represented in the survey hire virtually all new associates from their own second-year summer programs. They base those hiring decisions on first-year grades because, at the time they extend offers, there are no other law school grades to consider. Whatever courses students might take in the second or third years make no difference to their big law firm employment prospects.

Harvard also didn’t ask lawyers to identify courses that might help graduates become equity partners. That would be silly because there are no such courses. Even among Harvard graduates, fewer than 15 percent of those who begin their careers as new associates in big firms will become equity partners many years later.

So what did the survey investigate? The questionnaire could have read: You work in one of 11 big firms that serve corporate America. Your firm already hires many Harvard graduates. What courses can we offer that will make those newbies most useful to you when they start work?

Answering only the questions asked

Even within its narrow scope, the HLS questionnaire limited the range of permissible responses. For example, three questions focused exclusively on courses in “business methods” and “business organizations” (“BM” and “BO” — no laughing). Here’s Question #1:

“HLS has a variety of business methods courses that are geared towards students who have little or no exposure to these areas. For each of the following existing HLS classes, please indicate how useful the course would be for an associate to have taken (1 = Not at all Useful; 3 = Somewhat Useful; 5 = Extremely Useful).”

Respondents had to choose from among seven options: accounting and financial reporting, corporate finance, negotiation workshop, business strategy for lawyers, analytical methods for lawyers, leadership in law firms, and statistical analysis/quantitative analysis. Accounting and financial reporting placed first among all responses; corporate finance was second. Big deal.

Likewise, when asked to look beyond the seven business methods choices in identifying useful courses, respondents predictably chose corporations, mergers & acquisitions, and securities regulation as the top three. For decades, those classes have comprised the heart of most second-year students’ schedules. Again, no news here — and no magic formula that produces success in big law.

The options not offered

As for the misguided suggestion that the survey trashes experiential learning, only one survey question asked attorneys to identify the most useful courses outside the business area. Evidence, federal courts, and administrative law topped the list. But respondents didn’t have the option of choosing trial practice or any other experiential course because they didn’t appear on the questionnaire’s multiple-choice list of permissible answers.

So let’s return to some of the headlines about the HLS study.

Does the survey suggest that students taking business-oriented courses will be more likely to get jobs? No.

Does the survey suggest that students will be more likely to succeed — even in big law — if they take more business-oriented courses? No.

Does the HLS survey deal a blow to proponents of experiential learning? No. (In fact, an experiential option — negotiation workshop — did pretty well, placing third out of seven possible responses to Question #1.)

Desperately seeking something

In the end, any effort to overplay the survey collides with the authors’ concise summary: “The most salient result from the survey is that students should learn accounting and financial statement analysis, as well as corporate finance.” For that conclusion, no one needed 124 big law attorneys to complete an online questionnaire.

As the legal profession makes its wrenching transition to whatever is next, perhaps the unwarranted attention to the Harvard survey reflects a measure of desperation among those searching for answers. Motivated reasoning isn’t making that search any easier.

SPECTACULAR LIES

Question: “What happens after you’re kicked out of Harvard Law School for creating a phony transcript that inflates your grades?”

Answer: “You get an MBA from Stanford…and you get rich.”

Tragically, a real person, Mathew Martoma, lies at the center of that joke. He’s on trial for what the prosecution has called “the most lucrative insider trading scheme ever charged.”

When ethics is just a word

According to Bloomberg News, Martoma entered Harvard Law School in 1997 as Ajai Mathew Mariamdani Thomas. Born in Michigan and raised in Florida, he graduated from Duke University in 1995 with a degree in biomedicine, ethics, and public policy. Yes, ethics.

For the next two years, he worked at the National Human Genome’s Office of Genome Ethics in Bethseda, where he wrote three medical-ethics papers. Then he enrolled at Harvard Law, where he was a semifinalist in the school’s annual moot court competition, editor of the Journal of Law and Technology, and co-founder of the Society of Law and Ethics. Yes, ethics, ethics, and more ethics.

A bad turn

At Harvard, Thomas received “excellent grades,” but apparently not sufficiently excellent for him to show his parents (or so he later told a Harvard panel investigating his misconduct). So he created a phony transcript: Civil Procedure went from B to A; Contracts from B+ to A; and Criminal Law from B to A. He didn’t change his grades in Torts (B+), Negotiation (A-), or Property (A).

The fake transcript became the most important element in Thomas’ applications for a federal appellate court clerkship. A clerk for one of the judges thought something about the transcript seemed amiss and contacted Harvard’s registrar. The registrar confronted Thomas. According to the investigating panel’s subsequent report, Thomas told the registrar, “It was all a joke.”

Appearing before the Harvard panel, he dropped the “joke” defense. Instead, the panel noted that “Mr. Thomas was apparently under extreme parental pressure to excel academically.”

Thomas appealed the Harvard panel’s decision recommending his dismissal. According to the government’s motion in his current insider trading trial, he then fabricated a forensic report in support of his administrative appeal. The Harvard Law School faculty voted to expel him on September 17, 1999.

A fresh start

By 2001, Ajai Thomas had changed his name to Mathew Martoma and he was on his way to Stanford Business School. In 2003, he received an MBA and went to work for a Boston hedge fund. In 2006, he joined SAC Capital.

According to the NY Times, in January 2009 Martoma received a $9.4 million dollar bonus for his prior year’s performance in SAC’s healthcare group. During 2008, he’d made trades in Wyeth and Elan stock that netted his employer a lot of money, but also led to his current legal difficulties. Bloomberg reports that SAC fired him in September 2010 because, as one SAC executive allegedly put it, he was a “one-trick pony” whose trades in 2009 and 2010 lost money. A federal jury will decide his fate.

For your consideration

Wholly apart from whether Martoma is guilty of insider trading, his story provides an opportunity to contemplate issues that transcend him personally. For example, when should adult children stop blaming parents for their own misbehavior? Relying on that excuse blocks introspection that leads to personal improvement.

Likewise, did Martoma’s application to Stanford acknowledge his expulsion from Harvard? If so, how could Stanford have admitted him? If not, will Stanford rescind his MBA? The answers could have implications for the integrity of a world-class educational institution.

Finally, what insight into institutional behavior does Martoma’s experience provide? Harvard Law School gave him due process in a lengthy administrative hearing, deliberated carefully, and expelled him. The need to preserve the institution’s long-term values guided its conduct.

In contrast, SAC Capital apparently focused on short time horizons. A good year got Martoma big bucks; a bad year thereafter got him fired.

When it comes to their temporal mindsets, most big law firms today look more like SAC Capital than Harvard Law School. Following the business world’s approach — maximizing short-term results — has produced stunning equity partner profits. But sometimes, current profits have come at the expense of long-term values that don’t lend themselves to a simple metric. Those values include collegiality, loyalty, mentoring, institutional stability, and even client value.

So the next time someone says that the law is just another business, ask yourself if that’s a good thing. Consider whether some aspects of the law as a profession are worth preserving. And think about the unfortunate journey of Mathew Martoma.