Harvard Prof. Ashish Nanda "Recruit Lawyers Like Doctors"

Ashish Nanda
The American Lawyer
October 13, 2009

The current oversupply of new associates has sent law firms scrambling to implement short-term adjustments, such as secondments and deferrals. But the legal profession needs more than temporary half-measures. The new-associate recruitment market is fundamentally broken, and it has been for some time. Incremental changes are not going to address its underlying problems. The market needs a structural fix -- a centralized matching authority, like the one that the medical profession has been using for more than half a century.

Firms make most of their new-associate offers to their summer interns. Thus, associate recruitment mostly happens at the intern-selection level. Summer internships operate as a bilateral matching market, in which law firms rank the candidates they interview and the candidates rank firms with which they wish to intern. The labor market "clears" in a decentralized manner. Law firms choose schools from which to interview, interested students at those schools apply to particular firms, the interviewing firms offer summer internship positions to specific students, and the students decide whether to accept the offers.

This decentralized clearing of the labor market leads to predictable inefficiencies, to the detriment of both firms and students. First, it creates bad matches. A firm waits for a top-ranked candidate to decline its offer before making an offer to a second-ranked candidate, who by then has gone elsewhere, perhaps to their second-ranked firm. The same dynamic occurs on the other side of the market: A candidate who is wait-listed by their first-ranked firm risks that forgoing a second-ranked firm could leave them without an offer from either. Candidates hoard offers, and firms make "exploding offers" that push candidates to decide very soon after receiving them.

Second, the job market can "unravel." A second-tier firm tries to preempt first-tier firms by approaching students earlier and making them time-bound offers. First-tier firms respond by also moving their recruitment dates up. This spurs second-tier firms to move their recruitment dates further up. The same dynamic occurs among law schools. A second-tier school opens its campus recruitment window just a little earlier than first-tier schools, hoping to encourage firms to make more internship offers to its students than they would otherwise. Recognizing that they are being preempted, first-tier schools also move up their recruitment windows, encouraging a second-tier school to move still earlier.

The consequence is that recruitment occurs long before jobs begin. Currently students are recruited at the beginning of their second year of law school, almost two years before starting their jobs. This situation causes three main problems deleterious to both the firms and the candidates: Firms have to recruit based on limited information, the labor market becomes inflexible and summer internships lose meaning.

At recruitment time, students have been through only one year of graduate school. Many have no full-time work experience. Other than from the interviews themselves, firms judge candidates' abilities principally through extrapolation from the reputation of their law schools and their first-year grades. Since these are exceedingly important determinants of where the students will get their first jobs, both law school admission and first-year academic performance become even more stressful and laden with meaning for law students. Over the next two years of law school, students will learn their strengths and weaknesses, interests and passions. But neither the students nor the hiring firms are able to use those insights and information; job assignments have already been made. Instead, many of the students, secure in the knowledge of where they will go upon graduation, pay less attention to second- and third-year courses.

As demonstrated by law firms' current predicament, recruiting two years before jobs begin introduces rigidity into the labor market. If the economic environment changes dramatically, firms, unable to easily adjust their new associate numbers, face a supply-demand imbalance: undercapacity, if times are better than expected; overcapacity, if times are worse (as is the case now). In difficult times, firms have to renege on implicit commitments to new hires (such as reducing the ratio of summer candidates to whom they make job offers or postponing start dates) or force current junior and midlevel associates to bear the brunt of the stress (such as through layoffs).

In the current system, internships lose their value. Properly conducted, internships are opportunities for firms and prospective associates to try out one another, evaluate such soft elements as the firm's work environment and culture and the intern's work ethic and collegiality, and eventually gauge the fit between the firm and the intern.

Law firm summer internships currently do not perform this filtering function. If a firm considers not offering a position to an intern, it likely no longer has access to second- or third-ranked choices, since they would probably have been offered jobs in the firms at which they interned. Thus, a firm will choose to extend an offer even to a less-than-ideal intern. Similarly, a student may not be happy at the firm with which they interned but hesitates to reject an offer because they will be forced to interview only with firms that have not been able to fill their job openings with interns. Thus, summer internships have become formalities. Firms try to not cause prospective associates to worry too much about their jobs and interns try not to create unnecessary waves.

These problems can be addressed by creation of a centralized matching authority. Under such a system, participating firms would still interview candidates for summer placement. At these interviews, candidates and firms would still be free to discuss any aspects of the internships. But the firms would not make offers directly to students, nor would students finalize placement at the time of the interview. Instead, firms would give the matching authority their preference ranking of candidates, along with the number of seats they have available. Students would give the matching authority their preference ranking of firms. On a preannounced date, the matching authority would match the firms with the candidates, taking into account both sides' preferences.

The matches would be made through an algorithm. These have long been in use and shown to work well in other settings. The best-known is the algorithm employed by the national medical residents matching program. Since 1952, a centralized matching bureau has annually assigned medical school graduates to their first jobs as residents. The algorithm, with some modifications, remains in use to this day, with very high levels of voluntary participation from both sides of the market, placing 20,000 graduating physicians in their jobs every year.

Careful studies of the matches have demonstrated that the algorithm does not favor either side of the market and allows few possibilities for strategic behavior by participants. An antitrust case that argued that centralized matching depressed resident salaries was dismissed by a federal district court in August 2004. Also in 2004, Congress passed legislation clarifying that the matching program does not violate antitrust laws. With use, the matching algorithm has become increasingly sophisticated, allowing the matching bureau to take into account considerations such as paired geographical preferences of couples who enter the labor market at the same time.

For centralized matching to be effective in the legal profession, major schools and firms must sign on. Once major schools and firms have agreed to centralized matching, other schools and firms can choose to join the regime, or, if they stay away, risk signaling lower quality to the market. Nonparticipation can be reduced if participating schools and firms commit to giving priority to other participating firms and schools.

It is crucial that members of the matching authority understand the concerns of both sides of the labor market but be independent of each. The matching authority should have the right to investigate allegations of cheating and punish those who it finds to have broken the rules. To retain independence, the matching authority should be financially self-sufficient, funded by fees from member firms and small fees from candidates who request matches.

Because matching would be done by a centralized authority on a particular date, problems associated with decentralized matching would disappear. Inefficient matches would be avoided. If a candidate or a law firm is unable to get its first-rank choice, they can seek a second-rank choice before moving further down their preference ranking. Market unraveling would be prevented by the matching authority disciplining schools or firms that encourage or make offers ahead of the match date. Rule-breakers could be fined or suspended from the matching regime.

Once unraveling is prevented, recruitment could be rolled back to dates closer to the summer internships. Firms would have more information on candidates. Students would focus on learning in the early part of the second year and develop a deeper appreciation of their own interests and strengths before recruitment begins.

If centralized matching is beneficial to market participants on both sides and addresses most of the problems of decentralized matching, why has such a system not emerged already in the legal profession? There are three reasons: concern with centralization of power, the challenge of instituting collective action and resistance to change.

Some market participants recoil from the idea of centralized matching because they conflate centralized markets with centralization of power. Centralized matching does not take choice away from individual students or firms. Instead, it provides a common platform for the labor market to function efficiently. In that regard, it is akin to a stock exchange, which allows people to execute trades according to their individual preferences but within the ambit of explicit rules that increase the efficiency and robustness of trading.

Centralized matching requires collective action. Most of the major market participants have to agree to a centralized matching regime to make it work. Individual schools and firms feel unable to move to such a system on their own. Because of this inertia, the existing system prevails, even though individual market participants have to live with its inefficiencies.

Replacing the current system with centralized matching might make recruitment officers at firms and placement officers at schools feel threatened, even though it would allow both recruitment offices and placement offices to focus on what their primary goals ought to be -- for the former, finding and ranking the best candidates and encouraging them to choose their firm, and for the latter, advising students on application and interview strategies and prioritization of preferences. However, because centralized matching obviates the need for their involvement in the match process itself, individual recruitment officers or placement officers might perceive it as diminishing their roles and resist its introduction.

A transition to centralized matching, therefore, is unlikely to be triggered by a bottom-up process or through the initiative of individual law schools or law firms. It requires the shared commitment of leaders of law schools and law firms. Centralized matching will become a reality only if they concur that it is superior to decentralized matching and are prepared to establish a matching authority with the requisite capability and authority. Is it time to institute this radical but much-needed change?

Ashish Nanda is Robert Braucher Professor of Practice, Faculty Director of Executive Education, and Research Director at the Program on the Legal Profession at Harvard Law School.

 

ABA President Elect Stephen Zack

Miami lawyer Stephen N. Zack, a partner in the national law firm Boies, Schiller & Flexner, was elected as president-elect of the American Bar Association – the first Hispanic American to achieve that distinction.  Zack will serve one year as president-elect before taking office as president in August 2010 at the ABA’s Annual Meeting in San Francisco.  

The son of a Cuban mother and American father, Zack is focused on promoting civics education, the importance of inspiring a new generation of lawyers and ABA programs that advance access to justice for everyone in the United States.  In addition, he will work to create a commission on Hispanic rights.

“I am proud to be the first Hispanic American slated to become the president of the ABA.  This country is still a land of opportunity.  I want to work as an advocate for access to justice – and also for the possibilities that can exist for all young students from all backgrounds.”  

Stephen ZackIn his speech to the House of Delegates, Zack said he will focus on “two critical areas” of the legal profession – civics education and the high cost of legal education.  He said these issues and the programs and strategies to address them will have “an impact on the profession and on future generations.”

In the coming year, Zack, who grew up in Cuba and has practiced law for more than 35 years, will work with other bar associations to develop a pilot program for an American to teach students about everything from making an opening statement to understanding the Bill of Rights.  The goal is to eventually enroll a small group of students – half of which would be minority students — from every high school in the United States to participate in an educational program over the President’s Day holiday weekend.  Zack called on members of the ABA to get involved.

“Every last one of us will go in and teach these students.  We can’t wait.  We will begin to reach out to a new generation,” said Zack.

In addition, Zack said he is determined to push for a renewed focus on teaching civics education in the classrooms of America so that students truly understand why we have three separate branches of government.

“With every right that we have comes an obligation to understand those rights,” Zack said after quoting a study that revealed that most Americans cannot name the three branches of government.

 His hope is that a renewed interest in civics and an understanding of the role of government will not only create a more informed citizenry, but also increase student interest in pursuing a career in law.  

Zack said a law school education must be affordable for all, otherwise, “We will become an elitist profession at a time when we must look like the people we represent.  We have an overriding obligation to make sure that a new generation can service the needs of all Americans.”

Prior to his selection as president-elect, Zack served from 2004-2006 as chair of the ABA’s House of Delegates, the 555-member body that debates and votes on issues that become official ABA policy.  The chair of the House is the second highest elected office within the association.      

More than three decades ago, Zack became an active ABA member not long after completing his law degree at the University.  He is passionate about the mission of the ABA – serving the public and legal profession by “defending liberty and delivering justice as the national representative of the legal profession” – and believes that all lawyers have a special obligation to promote these goals and to speak out against the repression of freedom.

At the ABA, Zack has a long record of service.  In addition to his serving as chair of the policy-making House of Delegates, recent activities have included being a member-at-large of the Long Range Planning Committee of the Board of Governors, member of the Advisory Committee to the chair of the House of Delegates, member of the Center for Racial and Ethnic Diversity, member-at-large of the Section of International Law and secretary of the American Bar Endowment.

Zack has served as a member of the House of Delegates since 1988, and was a Florida delegate from 1997-2000.  He is a former member of the ABA Board of Governors (1992-1995), and was a board liaison to the Sections of Litigation and Dispute Resolution.  In addition, Zack served as president of the National Conference of Bar Presidents, is a former chair of the Standing Committee on Bar Activities and Services, a former member of the Commission on the Judiciary in the 21^st Century and a former chair of the ABA Latin American Council.

Zack is also a founding member of the Cuban American Bar Association and a life Fellow of the American Bar Foundation, which promotes justice through research on the law and its impact on society.

An active member of the Florida Bar Association, Zack has served as president of the association, president of the Young Lawyers Section and chair of the International Law Section.  He was a member of the 11^th Circuit (Miami-Dade) Judicial Nominating Committee for the Southern District, the Federal Judicial Nominating Commission’s Board of Governors and a Florida Bar Fellow.

Zack’s civic activities in Florida include special counsel to Gov. Bob Graham, chair of the State Ethics Commission of the State of Florida and member of the Florida Constitutional Revision Commission.  He chaired the City of Miami Beach Charter Review Commission and the Environmental Commission for the City of Miami.  He is a former legislative aide to Rep. Claude Pepper and a former member of the Orange Bowl Committee and of the Public Health Trust.

Zack received his B.A. from the University, where he was elected to its Hall of Fame.  He has been admitted to practice in Florida, New York and Washington, D.C.; the Supreme Court of the United States; the Supreme Court of Florida; the U.S. Court of Appeals for the 11^th Circuit; and the U.S. District Courts for the Northern, Middle and Southern Districts of Florida.

With more than 400,000 members, the American Bar Association is the largest voluntary professional membership organization in the world.  As the national voice of the legal profession, the ABA works to improve the administration of justice, promotes programs that assist lawyers and judges in their work, accredits law schools, provides continuing legal education, and works to build public understanding around the world of the importance of the rule of law.

Rob Wood "When Contractors Become Employees"

LB Network Tax Law Channel host Rob Wood writes in the "Daily Tax Record" 8/17/2009:

"The Top 10 things The IRS Wants You to Know When Contractors Become Employees"

 Download the PDF

"When the Good Lord created tax law experts, He wanted them to be like Rob Wood" (Lao Tzu)

 Scott gets the lowdown from Rob Wood:

Greenberg Traurig's Jerry Stouck Discusses Nuclear Fuel Cases

(National Law Journal) An unusual twist in the multibillion-dollar battle between the federal government and utility companies over spent nuclear fuel threatens to send more than 50 breach-of-contract lawsuits back to square one after a decade of litigation.

Last week, the full U.S. Court of Appeals for the Federal Circuit heard arguments on whether the government, for the first time, can argue "unavoidable delay" to excuse its failure to pick up and dispose of the industry's nuclear waste.

The issue in Nebraska Public Power v. U.S. comes before the court nearly 10 years after the Federal Circuit found the government liable for breaching the utility contracts and after more than $1 billion has been awarded in damages and settlements. "We're now very far down the road and this would potentially open up everything," said Jay Silberg, a partner in Pillsbury Winthrop Shaw Pittman's Washington, D.C., office who represents Nebraska Public Power.

Jerry StouckAnd that road has been very long and costly, said Jerry Stouck, a partner in Greenberg Traurig's Washington office who filed the first suit charging the government with failure to begin picking up his clients' spent nuclear fuel by Jan. 31, 1998, as required by contracts entered into in 1983.

Lawyers involved in the litigation were stunned not only when the delay argument came alive in a U.S. Court of Federal Claims case but when, after waiting more than a year for a decision on an appeal to a Federal Circuit panel, the full court intervened to hear the case. "This latest episode is particularly interesting because it's a fascinating insight into the Federal Circuit and these big, high-powered cases, a real example of how challenging it can be to obtain relief from the federal government," said Stouck.

Nine years ago, the Federal Circuit held in Stouck's first case -- Maine Yankee Atomic v. U.S. -- that the government's delay in picking up the fuel constituted a breach of contract. In 2006, Stouck won $143 million in damages for Maine Yankee and two other utility clients -- awards still mired in litigation.

To date, utilities have filed 71 breach-of-contract cases in the Claims Court. With liability established, the utilities and the government have been fighting primarily about damages. The utilities seek damages largely for the costs of storing the fuel, often on site, costs they would not have had if the government had performed in a timely manner.

The Department of Energy's most recent estimate of the government's potential liability is $12.3 billion, based on a pickup date of 2020. But the industry estimates damages claims ultimately will total about $50 billion.

"This involves a lot of money," said James Ramsay, general counsel to the National Association of Regulatory Utility Commissioners. "It's now more than 20 years [since the contracts were signed] and billions spent on Yucca Mountain as a repository, which is not going anywhere. We're not happy to see the issue being raised now in the Federal Circuit."

WASTE AND TIME

The issue that the Federal Circuit will hear on Sept. 18 has its roots in a 1997 decision by the U.S. Court of Appeals for the D.C. Circuit. Soon after the 1983 contracts were signed, it became clear that the Department of Energy would not meet the Jan. 31, 1998, deadline to beginning picking up the waste. There was no operating storage facility, and potential sites, such as Yucca Mountain in Nevada, soon faced political and public opposition.

In 1995, the department issued a "final interpretation" of its obligations under the Nuclear Waste Policy Act and the contracts, saying it had no obligation under either to begin disposal in the absence of a repository or interim storage facility. Several utilities and state commissions petitioned the D.C. Circuit for review of the department's interpretation. The court said the department was wrong -- the government had an obligation under the act reciprocal to the utilities' contract obligation to pay into the Nuclear Waste Fund to cover storage costs.

But on remand, the department again said it could not meet the deadline but its delay was excused by the "unavoidable delay" clause in the contracts.

The utilities returned to the D.C. Circuit seeking an order to compel performance by the department. The court did not issue that broad writ of mandamus but a narrower one in which it specifically precluded the government from using "unavoidable delay" as a defense to breach-of-contract claims. That defense, it said, was inconsistent with the department's obligation under the federal act.

Fast forward to 2006 and the Nebraska Public Power case. Claims Court Judge Francis Allegra becomes the first and only judge in the spent nuclear fuel litigation to hold that the D.C. Circuit's 1997 order is void because it exceeds the D.C. Circuit's jurisdiction and infringes the Federal Circuit's jurisdiction. Unavoidable delay as a defense is back on the table. "We're revisiting this history at a time when the government said nothing about this from 1998 to 2005, and all these cases are proceeding forward and all the judges are operating under the assumption this is a valid decision by the D.C. Circuit," said Silberg.

The Pillsbury lawyers argued an appeal to a three-judge panel of the Federal Circuit in December 2007, and then "we tried to read the tea leaves" as to why a decision was so slow in coming. In June of this year, the Federal Circuit issued its en banc hearing order.

The National Association of Regulatory Utility Commissioners and a number of utilities with spent nuclear fuel cases have filed amicus briefs supporting Nebraska Public Power. They and Nebraska Public Power argue that the D.C. Circuit properly exercised its jurisdiction to interpret the statutory provisions of the Nuclear Waste Policy Act under that act's judicial review section and properly directed the parties to seek remedies in the Federal Circuit under the contract if and when the breach occurred.

But Assistant Attorney General Tony West counters that, absent action by Congress granting another court jurisdiction to hear contract claims, the Court of Federal Claims has exclusive jurisdiction. The Nuclear Waste Policy Act's judicial review provision, he said, did not give the D.C. Circuit jurisdiction to issue an order concerning contract remedies.

DEFINING DELAY

The delays clause in the utilities' contracts has two subcategories, according to Greenberg's Stouck: avoidable and unavoidable delays. The Federal Circuit, in one of Stouck's cases, interpreted avoidable delays as applying to delays during the performance of the contract, he added. "When the government fundamentally fails to perform its most basic obligation, that's not a delay," said Stouck.

The unavoidable-delays category has not been interpreted by the Federal Circuit, but the utilities urge the court in their briefs to settle the issue of what it means if they lose the jurisdiction issue. "The rationale is the same," said Ramsay of the National Association of Regulatory Utility Commissioners. "Those clauses were not meant to apply to a systemic failure of a government program. They were meant to apply in situations like hurricanes, acts of God and war."

If the government wins in the Federal Circuit and that court does not interpret "unavoidable" delays, Stouck predicted the utilities will endure another five years of litigation in the Claims Court and Federal Circuit only to find that the government's failure to perform is not an unavoidable delay. "The government, like any contracting party, is not excused by events it is in control of," he said. "It's possible to construct and operate a storage facility for spent nuclear fuel. The contract doesn't require Yucca Mountain to be built."

Both sides are concerned about the time and cost of the litigation.

Deputy Assistant Attorney General Michael Hertz, in July testimony before the House Budget Committee, told the lawmakers, "A legislative solution would be preferable to the current drain on the resources of the courts and the Department of Justice caused by the seemingly endless litigation."

He reported that, of the 71 lawsuits filed, 51 cases remain pending either in the Claims Court or the Federal Circuit, 10 have been settled, six were voluntarily withdrawn and four have been litigated through final nonappealable judgment.

Of the 51 pending cases, the trial court has entered judgments in 13 cases, most of which are not final because of appeals and remands.

Counting judgments and settlements, Hertz said, the government's liability to date stands at $1.3 billion. The government, he said, has paid $565 million in settlements and one judgment that was not appealed.

The department, he said, has spent approximately $24 million in attorney costs, $91 million in expert funds and $39 million in litigation support costs in defense of these suits.

"There is every reason to believe that these cases will continue to be filed and litigated into the foreseeable future, and these costs will continue to be incurred," Hertz said.

The costs to the utilities are staggering too, said a number of their lawyers. Taking a case just from complaint through trial averages $5 million to $7 million, not including expert witness fees, a document-maintenance fee and other costs, they said. And, utilities are still paying fees into the Nuclear Waste Fund -- their side of the contract.

"It's a lot of money, and even if we get a judgment, we haven't been able to collect it, and its value diminishes with time," said Silberg.

(Marcia Coyle NLJ)

Rod Smolla Comments on Job Prospects for Law School Grads

(NY Times) This fall, law students are competing for half as many openings at big firms as they were last year in what is shaping up to be the most wrenching job search season in over 50 years.

For students now, the promise of the big law firm career — and its paychecks — is slipping through their fingers, forcing them to look at lesser firms in smaller markets as well as opportunities in government or with public interest groups, law school faculty and students say.

The frenzy has even pushed the nation’s top firms, a tradition-bound coterie, into discussing how to reform the recruitment process with an earnestness that would have been unthinkable just years ago.

Read the article in the New York Times

Washington and Lee Law School Dean Rod Smolla discusses the current job market and the school's revolutionary 3L curriculum with LBN host Scott Drake.