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November|December 2005
Fundamental Imports By Mark Tushnet
Second Look at the Second City By William Henderson
Born on the Fourth of July By Murray Dry

Second Look at the Second City

Chicago lawyers changed a lot in 20 years.

By William Henderson

AT SOME POINT IN LAW SCHOOL, probably during the first year, most students hear the lawyerly saw, "If the law is against you, argue the facts. If the facts are against you, argue the law. If both the law and the facts are against you, pound on the table and yell like hell." It should come as no surprise that lawyers and empirical research are often a bad match. Empirical research tests our perceptions of the world, and, when properly done, it shrinks the universe of contestable facts. But unlike social scientists, who tend to focus on methodologies and to draw inferences from samples of data, lawyers can't resist the temptation to score points through argument. They tend to dismiss empirical evidence that does not comport with their own experience or ideology.

This preference for polemic over empiricism often colors lawyers' views of their own profession. A well-developed genre of books, typically written by lawyers and law professors, uses anecdote and observation to argue that the legal profession is going to hell in a handbasket. Urban Lawyers: The New Social Structure of the Bar is not part of that tradition. Its authors, John Heinz, Robert Nelson, Rebecca Sandefur, and Edward Laumann, have written a meticulous work of empirical sociology. All are distinguished social scientists who have taken pains to put their findings in context, and their methodology yields carefully circumscribed facts rather than normative conclusions.

Urban Lawyers updates a 1982 study by Heinz and Laumann that was published as Chicago Lawyers. Drawing on detailed interviews with approximately 700 practicing attorneys, Chicago Lawyers presented a comprehensive analysis of the social structure of the Chicago bar. Its most famous finding was that Chicago lawyers were separated into "two hemispheres," one serving corporate clients and the other serving individuals. These two groups seldom overlapped and were sharply divided by race, ethnicity, law school pedigree, professional and social networks, and income. "Only in the most formal of senses," Heinz and Laumann said, "do the two types of lawyers constitute one profession." The interviews for Chicago Lawyers were conducted in 1975, when Chicago was fraught with political and racial turmoil. Although the feminist movement was then gathering considerable momentum, women comprised a minuscule 4 percent of the Chicago bar.

"Chicago Lawyers II"—the title given to the new study by the American Bar Foundation, its principal sponsor—provides a rare opportunity to carefully assess and, at times, quantify how much things changed since 1975. The complexity of the job is evident from the preface of Urban Lawyers, which exudes the tone of explorers safely returned from a decade-long expedition. The 787 interviews for "Chicago Lawyers II" took place in 1994 and 1995, and the publication of Urban Lawyers this year is the project's culmination.

Fortunately, some of the findings support the perception of social progress that is widely shared. For example, substantial numbers of women and minorities joined the legal profession between 1975 and 1995. High-status corporate law firms also hired a much larger proportion of students from less prestigious local and regional law schools. At least in recruiting, the distinctions based on social class, gender, and ethnicity have largely disappeared. And despite their harried schedules, Chicago lawyers have maintained a commitment to civic and religious activities.

Yet over the same period, the structure of the Chicago bar experienced a gradual but major transformation. Most fundamentally, the term "hemisphere" no longer applies, at least not exactly so: In 1975, 53 percent of Chicago lawyers worked primarily for corporate clients. By 1995, the figure had jumped to 64 percent while the percentage of lawyers serving mostly individuals had decreased to 29 percent. The other 7 percent of practicing lawyers represent the government; this figure changed little between 1975 and 1995. Since the total number of Chicago lawyers approximately doubled between 1975 and 1995, the number of lawyers for individuals actually grew in this period. Corporate firms, however, have been on a three-decade-long hiring spree. Quantifying this development highlights an important point: Surprising as it may be, many law students and law professors, and probably members of the public, don't understand that lawyers are increasingly employed to facilitate commerce. Despite the impression that many critics of litigation have helped create, few lawyers make it into court anymore, and those who do are often representing corporations in disputes against other corporations.

THE AUTHORS RESIST DRAWING BROAD CONCLUSIONS about the legal profession, though they readily admit that over the last three decades the large law firm has emerged as the "clear winner" in a variety of ways. Between 1975 and 1995, the typical Chicago law firm increased in size from 27 to 141 lawyers. Further, large law firms comprise a growing segment of the Chicago bar. In 1975, roughly 5 percent of Chicago lawyers began their careers in firms of 100 or more lawyers. By 1995, that figure had increased to 19 percent—and there is no reason to doubt that the percentage is even higher today.

Some academics have argued that the growth of large law firms is inevitable because their pyramid structure requires that, for every new partner, they hire two or more associates. But Urban Lawyers provides conclusive evidence that, at least in a large market like Chicago, a large surge in corporations' demand for legal services is an important part of this story. Not surprisingly, the compensation of associates and partners in large firms has increased dramatically—after adjusting for inflation, the average income of lawyers in Chicago's largest law firms grew from $144,985 in 1975 to $271,706 in 1995. The median incomes in all other practice settings, with the exception of in-house counsel, have remained flat or declined.

The rise of the large law firm has consequences beyond higher salaries and profits. For example, Heinz and his colleagues compared the social networks of the 1975 and 1995 samples and found that Chicago lawyers' professional contacts are increasingly drawn from within the firm. In part, that is because successful lawyers in large law firms build and protect their client base by referring work to their colleagues rather than to lawyers at other firms. And the growth in firm size and scope of practice makes it much more likely that a specialist on virtually any matter is somewhere in the firm. Lawyers therefore have less incentive to develop and sustain professional ties outside the firm with colleagues who are not potential clients. So over time, young associates begin to think of themselves as attorneys of Kirkland & Ellis, for example, rather than as members of the Chicago bar. This trend may be great for profits, but it undercuts the perception and reality of lawyers as independent professionals capable of self-regulation.

The data in Urban Lawyers also suggest that lawyers' political orientations are substantially influenced by the economic interests of their clients. Although lawyers in the 1995 sample tend to be very liberal on social issues, favoring affirmative action and pro-choice policies by a wide margin, they are also strongly pro-business. They are 50 percent less likely than the general public to believe that corporations have accumulated too much wealth or power. This disparity widened between 1975 and 1995 as lawyers took on more corporate clients. In other words, the social and economic values of lawyers appear to depend on who is paying them.

The larger size of law firms has had another subtle but important effect: Law partners are less willing to share profits or financial risk equally. Different legal specialties, geographic markets, and work habits (measured, inevitably, by billable hours) produce different economic returns. When lawyers don't interact with their nominal partners because, for example, they work in other offices or practice groups, the traditional "lockstep" model of compensation—in which every lawyer of equal seniority generally gets the same pay—can't survive. The result is a culture of free agency in which fewer associates are promoted to partner and more equity partners are willing to switch firms.

IT IS EASY FOR THE COMMENTATORS to decry this bare-knuckles capitalism, but the changes are not necessarily bad. The rationalization of corporate law firms is arguably an example of what Joseph Schumpeter, the great Austrian economist, referred to as "Creative Destruction"—the "essential fact of capitalism" that established economic structures and institutions are constantly supplanted by new ideas, technologies, and methods of organization. For example, lawyers routinely leave large firms to start small firms and solo practices. They rarely did so in 1975. Partners at major Chicago firms told the study's authors that approximately one-third of all proposed clients had to be referred outside the firm because of conflicts between the interests of the proposed clients and of existing clients. Many of these referrals now go to local boutique firms staffed by former big-firm lawyers. These firms are too small to poach the major clients of big firms, so their phones ring often. Yet big law firms have horrible diseconomies of scale—firms with 150 or more lawyers typically have overhead $70,000 higher per lawyer than firms with 20 or fewer lawyers. So corporate boutiques can charge lower rates, generate a comfortable income, and offer associates and partners some of the autonomy and control absent from the bigger firms.

But market forces may not be the only factors at play here. Professor David Wilkins of Harvard Law School and Professor Mitu Gulati of Georgetown Law Center have long argued that large law firms, consciously or not, run a "seeded" tournament that funnels the best assignments to associates with the best social or academic pedigree. Under this system, women and minority lawyers eventually feel like window dressing, so they tend to leave large law firms and often private practice at much higher rates than their white male counterparts. Unfortunately, the career patterns of women and minorities in the "Chicago Lawyers II" sample are generally consistent with this theory.

Urban Lawyers also provides a detailed picture of the large portion of Chicago lawyers who serve individuals through personal injury, family law, criminal defense, and trusts-and-estates work. For the most part, the news is not good. A startling statistic: In 1975, the median income of a solo practitioner in the Chicago sample was $99,159 (in 1995 dollars). By 1995, this figure had plummeted to $55,000. Further, 32 percent of the solo practitioners were working a second job in 1995 compared with only 2 percent in 1975. The distribution of income within the legal profession has always been a bell curve, with a small group of public interest lawyers earning a modest living, a majority of private practitioners in the middle class, and a handful of elite lawyers getting truly wealthy. But over the last three decades, the curve has become much flatter and developed two large tails. Law school has become a speculative investment for most law students, and Urban Lawyers documents only the lawyers who stick with the law. Solo practitioners and low-paid government lawyers, like public defenders, have the fewest ties to professional groups like local bar associations and appear the most likely to quit the law, so the author's data may understate the bleak economics that face low status lawyers.

HOW DO THE FINDINGS IN URBAN LAWYERS COMPARE with conditions in other cities? Some of my own research has focused on the 200 largest law firms in the nation based on gross revenues, commonly called the Am Law 200 because the data is compiled by The American Lawyer magazine. These are the same types of firms that Urban Lawyers portrays as growing and prospering. Between 1993—just two years before the "Chicago Lawyers II" sample ended—and 2003, the number of lawyers employed by Am Law 200 firms in the Chicago metropolitan statistical area increased from approximately 5,000 to 7,000. Similarly, Am Law 200 law firms opened 16 new offices in the area.

Though strong, the growth in high-end legal services in Chicago is not as vigorous as in some other cities—particularly New York. Between 1993 and 2003, Am Law 200 law firms added 9,290 lawyers in New York (from 11,920 to 21,210) and 69 offices (from 108 to 177). In many respects, New York is just plain different. The single best predictor of Am Law 200 profitability is the proportion of a firm's lawyers that work in New York City. The proportion of lawyers in other major markets, such as Washington, D.C., Chicago, San Francisco, and Los Angeles, has no bearing on profitability.

What, exactly, is all this information good for? The empirical data presented in Urban Lawyers provides readers with a clear-eyed picture of the changes that are reshaping the legal profession. Unfortunately, when discussing their own profession, lawyers and law professors tend to prefer the sweeping claims of polemicists rather than the measured results of social scientists. But Urban Lawyers might provide special value to law students.

In my experience, the insecurity many law students feel about their job prospects makes them more open to new ideas. As their angst builds over growing mountains of debt incurred to pay tuitions, students crave reliable, complete, and objective information about the legal marketplace. Surprisingly, that information is virtually never found in law school courses. Last year, I taught a course on the economics of law firms and discussed many of the empirical findings of the "Chicago Lawyers" I and II projects. The students were initially depressed to learn about the long hours, the stratified incomes, the dwindling partnership opportunities, and the two professional spheres that rarely overlapped. But as they worked through the material and listened to practicing lawyers place the difficult realities into context, the students grew more confident and self-assured about their futures. In contrast to many of their classmates, they learned how the legal world really works—empiricism gave them a competitive advantage.

So Urban Lawyers offers powerful stuff, especially for law students anxious about entering an increasingly difficult marketplace. In a truly important and memorable study, the volume provides a precise and nuanced assessment of the modern legal profession, in all its empirical complexity.

William Henderson is a professor of law at Indiana University School of Law.

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