When ethics and economic pressure collide, ethics are often the loser. So how are small legal firms holding up amid a host of competitors and a glut of lawyers? Pretty well, says Mary C. Daly, the Quinn Professor of Ethics at Fordham University School of Law in New York City and an expert on small firms. While every profession has its bad apples, Daly says rules of conduct and professionalism are still deeply ingrained. She spoke recently with BusinessWeek's Ann Therese Palmer. Here are edited excerpts of their conversation:
Q: Do you think that small law firms are handling economic and competitive pressures well?
A:Some are, and some aren't. Those that are have responded nimbly to the changes in the marketplace. The lawyers in these firms have learned to use technology effectively to cut down overheads. They've become more skilled in evaluating the worth of a case when a prospective client proposes to retain them. In short, some firms have become more savvy about the business of law. These coping responses aren't inconsistent with the concept of the law as a profession. Better business skills enable lawyers to deliver legal services more efficiently and at lower prices, thereby benefiting the public as a whole.
Some lawyers and law firms haven't been as nimble. They've been unable to adapt to the changing marketplace. They engage in unethical behavior in a last-ditch effort to save themselves financially. Typically, unethical behavior runs the gamut from misleading advertising to outright theft of client funds.
Q: Are you seeing some erosion in ethics? If so, what are you seeing?
A:To the extent there's an erosion in the professional ethics of lawyers, it's parallel to the general erosion of ethics in our society where people seem to be greedier and more materialistic than in the past. On the whole, individuals -- whether lawyers or not -- seem more willing to live by their own code of rights and wrongs rather than by a code imposed by society or a profession.
Q: What about advertising?
A:I'm a strong supporter of advertising. It helps unsophisticated clients become aware of their rights. It assists them in locating lawyers. The problem with advertising comes when lawyers market themselves as having skills they don't possess, and mislead clients into thinking that their cases are more valuable than they actually are. Responding to economic pressures, more lawyers are taking cases they shouldn't. Their conduct creates a whole set of false expectations which, in turn, diminishes the profession as a whole.
Q: How do you feel about Internet legal practices?
A:As long as the lawyers deliver competent services to the clients, I have no objections. But the practice of law on the Internet can pose a danger to the public. The problem is that our state-based system of lawyer regulation never contemplated a communications vehicle anything like the Internet. For example, the lawyer may be licensed in New York, the client may be in Florida, and the matter may involve assets in New Jersey. How can the client be sure that the lawyer is competent to handle the representation?
Q: What about outrageous advertising, such as people who use sex to sell legal services?
A:They may be in bad taste, but that does not necessarily make them unethical. The First Amendment protects commercial speech. Unless what the lawyer is saying is misleading, the states can't prevent the lawyer from advertising his or her wares in whatever manner the lawyer sees fit.
Q: What's the impact of this on the profession?
A:It's very negative. These ads are in bad taste. They're perceived by the public as tacky and shilling for clients.
Q: Where did this economic and competitive pressure start?
A:Part of it is that technology increased the overhead costs for law firms substantially. Part of it is the attention in the legal media to lawyers' salaries. You're dealing with type-A personalities who want to be first in the herd. If someone's making more money than you are, you want to catch up. So, you work your associates harder and increase your legal fees.
There's also more competition from in-house counsel. For small firms, the costs have escalated -- more money for rent, salaries, and technology. It has been difficult for small firms to raise their fees. So, if you're a smart, entrepreneurial small law firm, you try to make better use of technology to reduce staffing. You try to develop a niche so you'll have a steady stream of clients in one area that can form the backbone of your practice. You try to develop an ancillary business or two.
Q: Is the outlook very bleak?
A:I'm still optimistic. Many times in the past, the continued existence of the legal profession has been questioned. This is one of those times. The current changes in the marketplace will not trigger the legal profession's demise, however. History teaches that in the face of other serious challenges, lawyers have proven themselves to be innovative, entrepreneurial, and capable of surviving. They have survived, moreover, without abandoning the core values of their profession.