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New Gilded Age: Are Lawyers Too Rich to Solve Big Problems?

June 30, 2022, 9:30 AM

Welcome back to the Big Law Business column on the changing legal marketplace written by me, Roy Strom. Today, we talk with a law professor who thinks lawyers aren’t stacking up to the ideals of the profession. Sign up to receive this column in your inbox on Thursday mornings. Programming Note: Big Law Business will be off next week. Happy Fourth of July!

When I spoke with Indiana University Law Professor Bill Henderson on Tuesday, he’d just finished watching former Trump White House staffer Cassidy Hutchinson’s testimony before the House Jan. 6 committee.

Henderson, who built and sold a legal tech company and now studies the business of law, has been examining the role of lawyers in society. He was prompted by growing signs of economic instability and political uncertainty, like those on full display when rioters stormed the Capitol last year and in the hearings now unfolding on the hill.

His conclusion: Too many lawyers are working to get rich and ignoring other important aspects of the profession.

“We’re reaching a point when we have to step back and say ‘are we really doing our job as lawyers?’” Henderson said. “We have a first duty to our clients, then to the court system and broader society. Are we fulfilling those duties?”

Henderson is not some kind of radical. He’s well-known for writing about the legal industry and has put much of his energy since the 2009 financial crisis into developing new types of job opportunities for law students. He thinks about problems in terms of the systems that create them. Henderson has written about how “diffusion theory” means innovation in the legal industry will occur over generations rather than a few years.

He boils down many social and political issues, such as the rise of populism, opioid addiction in rural communities and Washington gridlock to one root cause: wealth inequality.

The top 1% of individuals in the US held about 35% of the wealth in 2020, approaching levels seen in the Guilded Age, according to a report this year from the World Inequality Lab.

Henderson says the legal profession’s work for wealthy clients exacerbates the gap.

“The historians tell you and the data shows you that these extreme wealth inequalities come and some sort of totalitarian movement from the left or right often follows,” Henderson said. “Lawyers are the ones that aid and abet the accumulation of wealth.”

So he set out to study the Gilded Age, an era he believes most closely parallels today.

His first essay on that era is a gripping read for anybody interested in the history of today’s Big Law firms. Henderspon details how Paul Cravath built an estate—twice—on a 600-acre parcel on Long Island. Cravath’s partner, William Guthrie, built his own compound nearby.

Perhaps Guthrie’s biggest legal accomplishment was developing arguments that ultimately led the US Supreme Court to strike down the federal income tax in 1894. The case was funded by the firm’s wealthy clients who would benefit from paying less taxes, according to Henderson.

The wealthiest lawyer of the Gilded Age was William Nelson Cromwell, known today as a name partner of Sullivan & Cromwell. He died in 1948 with an estate worth more than $200 million in today’s dollars, Henderson writes.

“We’re going back to Guthrie, Cravath level wealth here,” Henderson said of today’s lawyers, some of whom earn $20 million a year. “You’re getting to the point where some lawyers today can afford a piece of real estate like they had. If you’re that lawyer, great. But on the other hand, historically, it’s a warning sign.”

It’s a message that is sure to be difficult for Big Law firms, which spend thousands of hours a year on pro bono work providing legal representation for low-income clients or defending causes that lack financial backing. But Henderson points out the problem of legal representation for low-income litigants is far from solved: More than 75% of civil cases in state court feature one self-represented participant, according to the Self-Represented Litigation Network, an advocacy group.

Henderson, who teaches these issues to first-year law students, doesn’t have an easy solution for what lawyers can do to strengthen US institutions, but he wants lawyers to remember that representing clients isn’t their only professional responsibility.

Attorneys should “cultivate knowledge of the law beyond its use for clients” and “employ that knowledge in the reform of the law” the American Bar Associations Rules of Professional Conduct say. Henderson said that’s what he’s doing studying the Gilded Age—and he knows it’s easier for him to do as a law professor.

Today’s law firms, driven by billable hours targets and relentless client demands, aren’t a good environment for that type of practice, he said. Part of the solution, he argues in his essay, is stricter enforcement of antitrust laws, something individual lawyers or firms could help advance either in private practice or through government service.

“The firms have created an environment where the one thing people can agree about is commercial ambition,” he said. “If you think they’re being too commercially ambitious, you’re unlikely to be successful to get them to back off. The law firm is just not a good place, structurally, to act in concert to these serious issues.”

If there’s a Gilded Age analogue to the type of lawyer Henderson believes should emerge in today’s environment, it’s George Wickersham—known as a name partner of Cadwalader, Wickersham & Taft.

Wickersham represented large corporations but changed his work after becoming concerned lawyers had gone too far enabling the accumulation of wealth. He went about remedying the problem as attorney general for the William Taft administration, filing twice the number of antitrust actions as the administration of trust-busting Theodore Roosevelt, according to retired New York lawyer and author John Oller.

That earned Wickersham the nickname “the scourge of Wall Street.”

“Wickersham probably never got nearly as wealthy as Guthrie or Cravath, but he had enough money and did a lot of good. He at least pushed himself away from the buffet,” Henderson said. “I’m looking for people like Wickersham.”

Worth Your Time

On Big Law and Gun Control: Supreme Court practitioners Paul Clement and Erin Murphy left Kirkland & Ellis last week after the firm said it would stop handling cases involving the interpretation of the Second Amendment. I spoke with David Schultz about the news for a Bloomberg Law podcast.

On Big Law and Abortion: A handful of Big Law firms are pledging to protect employees’ access to abortion services after the Supreme Court overturned Roe v. Wade, Meghan Tribe reports. Other law firms are providing legal advice to patients and healthcare providers.

On Paul Hastings: Paul Hastings has a new leader who wasn’t expected to take the reins of the firm after joining just over two years ago, Chris Opfer and Meghan Tribe report. Frank Lopez will take over leadership in October from Seth Zachary, whose led the firm for almost a third of its 70-year existence.

That’s it for this week! Thanks for reading and please send me your thoughts, critiques, and tips.

To contact the reporter on this story: Roy Strom in Chicago at rstrom@bloomberglaw.com

To contact the editors responsible for this story: Chris Opfer at copfer@bloomberglaw.com; John Hughes at jhughes@bloombergindustry.com