**3. The First Cracks: Commodification and Bureaucratization**

While the Cravath system enjoyed a golden age during the 1950s and 1960s, it soon showed some weaknesses. As large law firms achieved economic success, they moved away from the more traditional values of the profession such as collegiality, autonomy, and public commitment. Market forces increased competition among firms and between these and corporate counsels, leading to uncertainty in economic terms.<sup>39</sup> Moreover, from the 1980s, the mode of production of legal expertise was transformed by a series of corporate reorganizations, the opening of new markets (for instance, the European Single Market), the internationalization of deregulated financial markets, and horizontal competition from large accounting firms.<sup>40</sup> At the same time, the underlying logic of the "promotion to partner", together with an unprecedented surge in demand for corporate legal services that followed businesses facing increased government regulation in various areas, led these firms to grow exponentially in size.<sup>41</sup> These developments were coupled with the growth of in-house counseling, which transformed the nature of the business of law as well as of the law firm's clients, who were now increasingly constituted by well-informed consumers of legal services.<sup>42</sup> In particular, the influential general counsels of large companies started shifting more work in house, using the competition between large firms to negotiate better rates for their companies.<sup>43</sup> All of the above led large law firms to start losing revenue, a fact that pushed them to enlarge even more in order to maintain the incredibly high profits of the partners. The means of this expansion were often mergers with and acquisitions of other firms;<sup>44</sup> a trend that continues to this day following a presumed client demand for "one shopping".<sup>45</sup> The history of the well-known contemporary mega-firm DLA-Piper best represents these developments. This firm came into being in the early 2000s, when two little-known regional law firms initially merged. This initial movement was then followed by additional mergers with three smaller firms and by an additional international merger with an English firm, resulting in the creation of a firm that at the time was behind only to Clifford Chance and Baker & McKenzie in number of attorneys. Aggressive expansion continued thereafter, as in 2005 the new firm of DLA Piper Rudnick Gray Cary acquired a seventy-seven lawyers from Ernst & Young's Russia, instantly giving it the largest law office in Moscow. Subsequently, the firm acquired forty-two lawyers from the disbanded Coudert Brothers to open a Beijing office at the end of 2005. By mid-2006, it was the world's second largest law firm with 3,100 lawyers in twenty-two countries and fifty-nine offices. Today, it counts about 3600 lawyers.<sup>46</sup> Same dynamics occurred in the United States, Germany, Denmark, and other European countries, as well as in Japan. On an international level, nine out of ten law firms in Germany entered into international mergers or alliances in the year 2000; the same could be said for the five biggest firms in Denmark, which are all the result of mergers between smaller firms.<sup>47</sup>

With this came the need to specialize, which in turn pushed these firms to stop training their associates (at least in part), but to acquire them from other firms.<sup>48</sup> Same dynamics occurred at the level of partners, as often lawyers able to attract business (the so-called rainmaking partners) were lured into shifting firms after receiving important economic offers.<sup>49</sup> In this changing environment,

<sup>39</sup> See, for instance, (Heineman 2016).

<sup>40</sup> (Dezalay and Garth 2004).

<sup>41</sup> (Galanter and Palay 1991, p. 52; Bruck and Canter 2008).

<sup>42</sup> (Regan 2004, p. 33).

<sup>43</sup> (Bruck and Canter 2008) Others have also convincingly argued that the rise of the in-house counsels led to a "decline of relationship lawyering" as these grow less attached to their law firms, and are more likely to shop for cheaper or more effective solutions. See, for instance, (Baker and Parkin 2006, p. 1637).

<sup>44</sup> (Harper 2013).

<sup>45</sup> (Aronson 2007). A viewpoint confirmed by many informants in the interviews, in particular by senior partners of large law firms in both Denmark and the United Kingdom.

<sup>46</sup> A timeline of the DLA-Piper expansion is availavble here: https://www.dlapiper.com/history/#year2005.

<sup>47</sup> (Madsen 2008).

<sup>48</sup> (Regan 2004, p. 35).

<sup>49</sup> (Fergus 1995).

profits were also maximized by increasing the ratio of non-partners lawyers to partners through the creation of a variety of non-partner permanent positions within the firm (permanent associates) or by hiring contract and temporary lawyers.<sup>50</sup> Some firms also began to differentiate among classes of partners, creating categories such as non-equity partners and partners without voting rights.<sup>51</sup> In this regard, it is important to mention that the lockstep compensation system based on seniority was largely abandoned in favor of a compensation system reflecting productivity of each lawyer, the so-called "eat what you kill" approach, at least in the United States.<sup>52</sup> These dynamics have been made even more evident by the more recent developments related to globalization, which triggered the transformation of many large law firms into mega firms, with thousands of partners in different geographical locations and armies of more or less young associates, non-equity partners, and the like among their ranks.<sup>53</sup>

Thus, large law firm lawyers were led to abandon the corporatist and elitist logic that had characterized the early Cravath system and to orient the professional project toward marketization and commodification. In short, the professional project was now almost entirely turned toward the relentless pursuit of growth and profit at the expense of the public commitments of the new legal elite.<sup>54</sup> Moreover, the immense growth in numbers pushed these firms toward internal bureaucratization, resulting in the adoption of forms of central direction and rationalized management presided by full-time professionals; development of high levels of specialization, with firms divided in departments and organized to coordinate the work of the various specialists on the problem of the client; and high level of stratification and hierarchy, with the number of partners that fell dramatically in proportion to all other lawyers.<sup>55</sup> The ethos of professionalism was, thus, replaced by the ethos of bureaucratization and rationalization. In other words, while in the early decades of the 20th century large law firms lawyers were associated with patrician airs and professional nobility, they were now businesslike organizational men devoted to the interests of clients. Among other things, this had the side effect of creating a growing dissatisfaction among lawyers and clients. The latter started complaining of the exceptionally high prices for legal services that this system had created and started shopping around for legal services, becoming used to shifting from one provider to another when obtaining competitive and pricing advantages.<sup>56</sup> For their part, lawyers, especially associates, started complaining about long hours spent on mundane matters, such as reviewing documents and/or tweaking version after version the same deal documents, without client contact or a say so in the legal strategy.<sup>57</sup> In the post-2008 financial crisis legal world, the complaints among young lawyers are perhaps even stronger. Whereas previously the associates would at least receive high salaries and substantial prestige for performing

<sup>50</sup> (Galanter and Henderson 2008). Non-equity partners are attorneys who are treated as partners in terms of outward appearance (i.e., in relations with clients and other outside parties) but do not share in a percentage of the firm's profits and are therefore not owners of the firm. A majority of large law firms now have non-equity partners, and their numbers are increasing. According to the AmLaw 100, 2020, non equity partners are, on average, 44%, and only 15 firms have only equity partners.

<sup>51</sup> According to Steven Harper, the creation of a large cadre of permanent non-equity partners can result in big problems for a firm. This is because it can create second-class lawyers but also may result in depriving young lawyers of many opportunities (Harper 2013, p. 82).

<sup>52</sup> (Regan 2004). As put by Aronson: "Under the traditional lockstep system, younger partners were generally underpaid for their efforts, while older partners tended to be overcompensated relative to their contribution to the firm. This system worked in a well-capitalized firm in a stable setting where young partners were confident that the system would still be in place and work to their benefit when they became senior partners. However, as firms grew and it became common for partners to move among firms, it became increasingly difficult to pay partners on any basis other than current performance. Young partners will generally not agree to delay receiving compensation and invest in a firm's future when other firms will pay them more in accordance with their current market value (Aronson 2007, p.771).

<sup>53</sup> (Flood 1996).

<sup>54</sup> This led scholars to call into question the professional ideal of public service. See, for instance, (Kronman 1993). See also, (Halliday et al. 2008).

<sup>55</sup> This is similar to the path previously followed by other large professional service organizations, such as accounting firms, and includes, in many cases, a change to a limited liability partnership when that corporate form became available in the mid-1990s.

<sup>56</sup> (Guttenberg 2012). A viewpoint expressed by all my informants in the interviews.

<sup>57</sup> (Wilkins and Gulati 1998).

mundane tasks as associates at top law firms, these now hire fewer associates and rely instead upon "staff attorney" or "temporary" positions, which do not provide the same prestige, security, or salary as the traditional law firm associate job.<sup>58</sup> Today, even the partners of these large firms score relatively high in terms of job dissatisfaction. In a world in which clients no longer remain loyal and law firms compete intensely for business, law firm partners find themselves spending more time on business development and management and less time practicing law.<sup>59</sup> This growing dissatisfaction among large law firms lawyers was also confirmed by many of my informants in the interviews. Particularly relevant here are the statements of a number of former large law firms partners, now CEOs of legal tech companies, who have deliberately chosen to leave their very remunerative practice to build independent companies not only to unleash their entrepreneurial mentality frustrated by the nature of the work in large law firms, but also to pursue a better work life balance.<sup>60</sup> The statement of the Managing Partner of a Danish large law firm summarizes the issues at stake:

A: During the last two or three years we said goodbye to very skilled and talented people; even people that we put on our partner track. The first couple of times this happened we were a little bit amazed, because we thought we gave these people the very best offer available. You can become a partner in one of Denmark's largest law firm with, at least in our opinion, the most spectacular cases you may get. You can appear before the Court of Justice of the EU if you like, you can go litigate in Greenland, and so on. We have the work. So, when they left to go fund their own company, often a two men company, then we were quite amazed and said: "Hey, what happened there, why would they do that?" But instead of saying, they must be idiots, we sat down and thought: "maybe we are not as attractive as we thought we were." And why is that? Well, I think that, as firms grow bigger, even though you do become a partner, you will become one out of 60 or more partners. It is not as prestigious as it was before and if you really do have an entrepreneurial side inside yourself, then what does it mean to be one out of 60? It means that you still have to follow orders—unless you have my job of course.<sup>61</sup>

The consequences of these trends have been varied. Some commentators have documented the demise of the full-service law firm. Others have underlined that these developments may bring about significant changes in firm work culture and life, especially in terms of increased flexibility. Today, many lawyers are already changing their work rhythms and locations, some preferring to work remotely from home rather than from the office. My guess is that this trend will continue, ultimately resulting in a change in the law firm business model and associated culture, and possibly its traditional use of imposing office buildings in down-town settings.<sup>62</sup> What is sure is that less office space will be needed.<sup>63</sup> Others emphasized the perpetual instability in relation to clients and lawyers hired in a firm and the consequent need for large law firms to continuously move into new markets, pursue new alliances, and expand operations, at times even globally.<sup>64</sup> For one thing, while historically corporate lawyers belong to a relatively small and socially homogenous group of "old boys groomed and trained in elite institutions",<sup>65</sup> at the turn of the century, they found themselves inhabiting "a universe whose governing laws are those of the market."<sup>66</sup> In other words, large law firms lawyers ended up being

<sup>58</sup> (Molot 2014, p. 17).

<sup>59</sup> (Baker and Parkin 2006, p. 1638).

<sup>60</sup> Interview with CEO of Danish legal tech company. Interview with CEO of new-tech based law firm in the United Kingdom. <sup>61</sup> Interview with Managing Partner of Danish large law firm, 20 September 2019.

<sup>62</sup> See, among others, (Caserta and Madsen 2019).

<sup>63</sup> (Baker and Parkin 2006).

<sup>64</sup> This instability is also reflected in that, in the past decades, many major firms with more than 1000 partners have collapsed entirely. The surviving lawyers live in fear of suffering a similar fate, driving them to ever-more humiliating lengths to edge out rivals for business. See, (Scheiber 2013).

<sup>65</sup> (Dezalay and Garth 2004, p. 625).

<sup>66</sup> (Regan 2004, p. 42).

associated with the businesses and the business tactics they assisted, and not with a legal elite anymore. This ultimately resulted in firms significantly losing autonomy from the clients; that autonomy in part had allowed the early Cravath lawyers to present themselves as the moral entrepreneurs of the new capitalistic society and, ultimately, in actively participating in the construction of the state and economy. According to Dezalay and Garth, at the turn of the century, large law firm lawyers "appeared much more like multinational conglomerates of professional mercenaries in the service of big financial interests than guardians of the public interest."<sup>67</sup>
