Wilmer Cutler has decided to merge with Hale & Dorr (WSJ$), two 500-lawyer gorillas creating a 1000-lawyer elephant.
It's not surprising. Consider why there have long been just a few mammoth dominant auditing firms, while industry concentration is much lower in legal services. Auditors trade on reputational capital, which requires them to be independent of individual clients. (Alas, recently, not independent enough.) So do law firms. Particularly in the wake of Enron, law firms must vouch for their clients. As I have written in this draft of an article forthcoming in the Journal of Corporation Law, firms' reputational capital can be an alternative to liability of firms and individual lawyers. As with auditing firms, bigger law firms can amass more such capital, and become more independent from clients.
Unfortunately, as described in this article (with cites to my other work on this subject), legal ethical rules constrain law firms from getting as big as they need to get. In particular, restrictions on non-competition agreements prevent firms from binding lawyers to the firm. These restrictions also constrain firms from compensating lawyers in ways that get them to focus on the long-term interests of the firm.
In other words, without ethical rules, big law firms would get even bigger, and more independent from clients. The result might be that lawyers would be more, rather than less, loyal to the long-term interests of clients and society. Ethics can be viewed as yet another product of free markets.
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