This year, hiring bonuses for former Supreme Court clerks at major law firms are expected to reach $250,000. That sounds like an extraordinary and unwarranted sum. In today's New York Times, however, Above the Law's David Lat argues that these gargantuan bonuses may be irrational for individual firms, but good for the legal system as a whole.
even if the astronomical Supreme Court clerkship bonuses may be dubious investments for law firms, they are good news for our legal system. Here’s why: by promising clerks a financial windfall on the back end of their clerkships, firms encourage bright young lawyers — many of whom carry loads of educational debt — to render service to the court and country. The bonuses place clerks in a similar (or superior) position financially to their classmates who went directly into private practice instead of clerking for two years (the first with a lower-court judge, the second with a Supreme Court justice). The bonuses can be viewed as an after-the-fact supplement, paid for by the private sector, to comparatively modest clerkly wages (less than $65,000 a year).
The financial freedom supplied by these bonuses can allow the clerks who decide against a corporate career to move on more quickly to what truly interests them — academia, government practice or public-interest law. Law firms end up in effect subsidizing less wealthy precincts of the profession.
If the market says that's worth 250k, chances are it's because clients will be impressed to the tune of 250k of work.
While clerkship salaries, like judicial salaries, need to remain in the ballpark of private-sector pay in order to remain at least a tolerable alternative and attract higher quality candidates, the prestige of a Supreme Court clerkship is, I think, a more than sufficient draw to continue to attract the highest quality candidates out there. At a $250,000 signing bonus, I'd be more worried about attracting mercenary clerks rather than those who care significantly about public service. Clerks have too much influence (in some cases, with some justices) and their role is largely too little known, to worry about them being tempted by seductive promises of massive post-clerkship bonuses.
-dk
But they only collect the bonus if they go to work for the firm. Is it the case that there is no requirement that the former clerk remain with the bonus-paying firm for some length of time?
Although an attorney myself (and no longer practicing, as I started my own business as a consultant to software and IT companies), I know that we are losing the lead on IT innovation here in the US. Other countries are gaining on us. If we keep shifting our resources to such fields as law, sports and entertainment, then you shouldn't be surprised when most young people want to go into these fields as professionals.
Meanwhile, we can't raise taxes to make sure our schools are places of learning....
. . . law, sports, entertainment, and consulting.
How does it do that? Unless I'm mistaken about how clerkship works, these bonuses are offered two years after law school graduation, or six years after a person would likely have decided to go to law school. It seems to me that the effect of a tiny chance of receiving these bonuses so far in the future would have a minimal effect on choosing to go into law.
Additionally, I probably spend more time doing pro bono work for the four non-profits that I advice than actual work for myself. I know, I'm a sucker, but that's my problem!
"It seems to me that the effect of a tiny chance of receiving these bonuses so far in the future would have a minimal effect on choosing to go into law."
I disagree. Students see one figure, a quarter of a million dollar bonus. Doesn't matter how that is split up -- it's still way more money than most people have ever seen. Couple that with the first year salaries that we often hear bandied about that are in the six figures, and that's a huge draw.
If lawyers earned as much as teachers, we would have about five law schools in the whole country. and much less litigation....
And as for the canard that this is what the market bears -- BS. Lawyers charge whatever they damn well please, and everyone has to pay it. If teachers had that ability, their salaries would be pretty high too -- but they can't. When have you ever heard of someone who 'shopped' for the best bargain lawyer? Is there a 'best buy' law firm, who does the best work at the cheapest prices? It's a strange distortion of the market, and perhaps unique in our society, but a 'free market' it ain't.
Now, great work at cheap prices? That's not so likely. But then, that's exactly what the free market provides for... lower quality, thus less desirable, goods and services cost less, while higher quality, more desirable goods and services cost more.
you're so right, concepts such as supply and demand play no role in the legal market. Why, just yesterday a friend asked me to help him with a traffic ticket and I stuck my pinky in the corner of my mouth and demanded "One . . . MILLION dollars," and by the next day he had wired the money to my account.
No, they do not. It's why I only have to pay $200 for a lawyer to represent me in traffic court.
The reason why big firms can charge so much (but not "whatever they damn well please") is because their clients have much at stake. (Even assuming there is no competition as you seem to imply, the transaction will still be an efficient outcome, but most of the surplus will be going to the lawyers; monopolies cannot charge whatever they want, that's a myth.) Now, it's hard to say whose "fault" that is. It could be juries for rewarding high punitive damages. It could be regulators for increasing transaction costs. It could be judges for creating complicated procedural rules. It could be businesses for being so large and successful that simply dealing with one another always creates large amounts of wealth transfer.
I doubt it.
From the rest of your economic analysis, this strikes me as unsurprising.
To understand why, one has to realize that there is not a single point of decision at which one decides either to go straight to a firm or to clerk for the Supreme Court. Rather, to clerk for the Supreme Court you basically first have to commit to clerking for a federal COA, and with few exceptions there is no guarantee that the Supreme Court clerkship will follow the COA clerkship.
Moreover, to get both the federal COA clerkship and the subsequent Supreme Court clerkship, you will have to build up your credentials during law school, which usually requires a lot of work. And again, in most cases your effort alone will not necessarily guarantee you a federal COA clerkship, let alone a subsequent Supreme Court clerkship.
Now consider the firm alternative: many people who are at least tentatively on the Supreme Court track basically get their firm jobs at the beginning of 2L on the basis of their 1L credentials. So, if you decide to go the direct to firm route, you can opt out of a lot of work. And again, even after a very successful 1L year that tentatively puts you on the Supreme Court track, there is likely still only a small chance of eventually clerking for the Supreme Court.
So, I could see why firms would be worried about too many students deciding not to do what it would take to have a (small) chance at a Supreme Court clerkship because they had already secured their desired firm job. And I do think firms in this limited respect are a victim of the ever-growing disparity between elite firm salaries and elite government salaries (including clerkships).
Indeed you're correct, and the money could be better used ("for the good of the system") by spending it on loads of people *other* than those attending Harvard and Yale, and *other* than those scraping by on $65,000 per year at SCOTUS. As well, if people want to go to those schools because the "potential benefits" are quite high, then let them assume the "potential risk" as well.
Baloney. Yes, in theory that is supposed to be how it works, but the real world is much different. Anyone who has been in this business long enough knows that the real key is to charge as much as you possibly can, precisely because there are enough fools around who believe that 'you get what you pay for.' If you charge a high price, ergo, you are a terrific lawyer. It should be the other way around, I agree, but it is not.
I could give tons of examples. One of my friends is an actor, and when he started out, his agent made him reject the low paying commercials. He said to hold out, charge more, and sit tight. For the first few years, it was a struggle, but then as word got around that he charged a lot as an actor, directors started to hire him on the assumption he's better than other actors. He is the first to admit that there are plenty of other actors who charge less, but are at least as good, if not better.
Heck, I know an economist at the World Bank who was in the market to buy a piano for his son. The teacher recommended a terrific piano in the 10,000 range, but he found another one for $30,000. The teacher didn't like it nearly as much and said so, but the economist was sceptical, and replied that if it's $20,000 surely there is a reason for it, and it must be a better piano. So he bought that one, and I've played on it. It's terrible. He should have bought the $10,000 one.
And so there is always upward pressure on pricing for such services. Anyone who chooses any products or services on the basis of price is a fool and an idiot, and deserves to be parted with his money as fast as possible.
for most other lawyers, and especially corporate lawyers, they can set their fees as they please, within some limits, of course, but then they can bill just about as much as they please. I would love to hear stories of a corporation saying that they need a contract executed, and will pay $5,000 for it, no more. But it doesn't work that way -- the lawyers just do the work and present a bill later on. If the lawyers bill $10,000, then the corporation has to pay for it. Heck, when I need a new roof, I get three estimates and I check references, and I go with the best price. When have YOU ever had that happen with law firms? Sorry, but people don't 'shop' for lawyers like they do for a new roof, or a new pair of shoes, and so the market is not at all like a real supply and demand one would demand.
I remember a joke from law school. The president of a company said that every year he gives his lawyers an unlimited budget, and every year they exceed it.
Actually, in my experience that is not how the law firm market works for corporate clients. Even this is an oversimplification, but roughly speaking, when the billing partner submits the full bill to the corporation's general counsel, the general counsel will object to the amount, requesting a discount. The billing partner and the general counsel will then negotiate the bill down to something they can both accept. The corporate client's leverage is precisely that corporations routinely need legal services, and so the firm does not want to overcharge now and lose out on providing those future services. In other words, the implicit threat is that some competing firm will get that future business.
And generally, I get the sense that sophisticated clients are seeking alternative billing arrangement in advance to help provide some amount of predictability to their legal costs, and at a minimum are initiating fee discussions in their first meetings with firms. And that is again an area in which firms implicitly or explicitly end up competing against each other for business.
But of course, if I knew that, and I was a corporate lawyer, then my response would be to pad the initial legal bill. Say the services totalled 10,000. I would bill for 12,000, knowing that we will have to get chewed down. I still get my original 10,000 or thereabouts, so I'm not sure this is a perfect system. Though I concede that some lawyers may not be so dishonest.
But what about plaintiff's lawyers? I thought everyone took one-third? Does that mean that all plaintiff's lawyers are exactly the same in terms of quality and services? If I were a really really good plaintiff's lawyer, why wouldn't I ask for 40%? And if I were terrible, wouldn't I lower it to 20% to get some business in my door? Doesn't seem to work that way, does it? A truly market based approach it isn't.
Again, though, the corporate client's ultimate leverage is not appeals to the billing partner's personal sense of fairness and honesty. Rather, it is the threat of the client taking their future business to other firms if they feel that they were overcharged on this particular matter. So, the billing partner is actually constrained by the firm's competitors in the market.
As for contingencies, as an aside, the idea is precisely that better lawyers make more off the same contingency rate because they get better outcomes for their clients. But in any event, there are many dimensions of negotiation besides the contingency rate proper, such as expense provisions (eg, it often makes a huge difference whether the lawyer takes out his expenses before or after he calculates his fee). Lawyers will also agree to take different contingencies depending on where the case might be in the process, and that is another implicit threat clients can use when negotiating fees. And so on.