Why Corporate Law is a Total Scam


Corporate law is the Mecca of the law field. Frankly, if you aren’t a corporate attorney, you probably are going to have a hell of a time paying off your student loans. It only makes financial sense to go to to law school if you are going to work in a giant law firm and rake in tons of cash.Yeah, you are going to have to work 90 hours a week, but on the bright side, you’ll have financial freedom. That’s the choice law students have to make — gripping life long debt or soul sucking life long servitude to a firm that will work you 90 hours a week.

But it’s all a total scam. Supposedly rational businesses are lining up to give all of their hard earned cash to bloated corporate law firms. I always scoff a little bit when economists assume people act in rational ways solely related to profit. The statistically insignificant sample size that is my experience says this almost certainly false. And the way businesses pay for their legal representation seems to solidify my theory that human behavior is far more complex than the bottom line.

Corporate law firms are set up as follows: they hire a bunch of extremely desperate and highly indebted students from the top universities in the county. People who had high expectations for their life, but were either tricked or threatened into going into law school. Now, they are too educated to get another job, but too in-debt not to make good money. So, they work for these firms and get lofty six figures jobs but, since they have no other option, they willing work 90 hour weeks in order to keep their jobs. If they don’t spend enough time in the office, they are out into the depressing world of never paying off your student loans and financial ruin.

What’s wrong with this situation should become immediately clear. The people doing the legal work for any given company are not motivated to do a quick, amazing, and efficient job. You know what happens to attorneys who are extremely efficient? They don’t make billable hours. You don’t make billable hours, it’s public interest work for you. And so, the whole system is set up to make legal work as inefficient as possible.

When a young associate has a motion to write, they make it 100 pages with random references to various  cases that may or may not apply. Chances are the judge doesn’t have time to read  the whole motion and make sure it is all relevant. Besides, he or she might be impressed by the sheer volume of work. The client sees volumes of work and is extremely impressed with the time the associate spent on their case (or if not impressed, at the very least, hard pressed to say the 900 hours invoice they receive for such motion is not legitimate). The firm bills them for 900 hours, pays the associate a small percentage via that six figure salary (which is not looking so large when you’re billing hour number 900 one month into the billing year), takes the rest as profit and everyone is happy.

Except that any competent attorney could have written that well drafted and complete motion in 4 hours. Sure, it wouldn’t cite every case known to human history, but let’s be honest, big firms are hoping the judge wouldn’t actually read them anyway. The length of the motion is not meant to be substantive, it’s meant to be impressive to look at.  And, supposedly rational companies justify this sort of waste. Why not? Associates pick up their phones at 3 am on Saturday nights because, well, they have no choice, remember? They are completely unemployable outside the legal world and 90 hour weeks are expected at all big corporate jobs. So, the companies get as close to having an indentured servant as they are ever going to get and, as an added bonus, partners take them out to lavish and expensive dinners randomly throughout the year.

Of course this would never ever work in any other sort of service industry. People don’t pay their accountants extra for taking an extra long time to do their taxes and filing extra needless paperwork with the IRS. And they sure as hell aren’t impressed with dinners that cost about .001% of their accountant’s total fees. No one brags about how awesome a restaurant is because it bills the customers for every hour they spend pointlessly arranging rosemary on the plate. That’s what a lot of corporate law work amounts to — arranging rosemary on the plate.

Sure, companies complain that they can’t ever budget since they never know how long it’s going to take a first year associate to write a motion responding to the inadequate answers to interrogatory questions number 4, 8, 30, 38, and 40. But, they don’t say “This is completely ridiculous, I’m not paying you for manufactured work!.” Instead, they go out to dinner with extremely likable partners and down a bottle of wine and all the while become convinced that legal work really is just that hard and impressive and impossible to estimate ahead of time. How could firm that’s done 3,902,483 foreclosures know how much it would cost them to do another one for you? Obviously, it’s impossible! But those partners sure are friendly (or if not friendly, at least equipped with a limitless firm corporate card that will cover enough bottles of $200 wine to disguise any shortcomings in their personality)!

The entire business of justifying the pay scheme for corporate law ends up looking a lot more like care sales then it does any other service industry. Getting an attorney is a lot more like going to the hospital to have a surgery.  You have no idea how much it’s going to cost in the end and no one is at all concerned about telling you. Except that, with attorneys, you don’t have insurance and you are on the hook for the whole thing.

I can’t really blame the corporate attorneys for what they are doing. It’s not like the billing structure is a secret. Businesses are supposed to be highly intellectual consumers. If they want to pay for lavish dinners and needlessly time consuming legal work, why not? But, I do wonder, if General Counsels really are all that intelligent. Anyone could tell you that that bloated salaries contingent on logging as many hours as possible isn’t going to yield efficiency. Why don’t the shareholders question how much of the companies profits are dropped into legal fees? I suppose most of the shareholders are attorneys themselves. So, they aren’t going to suggest that an attorney’s time is worth anything less than $5,000 an hour.

(image: Business people shaking hands finishing up a meeting via Shutterstock)

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