Why Lawyers are Different and Why We are the Same: Creating Structural Incentives in Large Law Firms to Promote Ethical Behavior – In-House Ethics Counsel, Bill Padding, and In-House Ethics Training

Abstract:     
Lawyers, more than ever, are interested in their ethical obligations. They should be, because malpractice law suits and government enforcement actions – both based on the Rules of Professional Conduct – are on the increase.

Our ethics rules make lawyers different than other professionals, and the popular culture does not always understand us. When a medical doctor treats a patient, there is no doctor on the other side representing the disease. Not so for lawyers. In most cases where lawyers are involved, each side has a lawyer, and each client does not appreciate the lawyer on his side defending the adversary.

There is no simple magic bullet that will make lawyers feel better about what they do, or make society appreciate the lawyer’s role. However, a study of the economic and psychological literature offers hope. There are several reforms that law firms, particularly large law firms, can institute to make lawyers feel less anonymous and encourage ethical conduct. Firms should create, and the law should encourage, structural incentives to reduce anonymity because that promotes ethical habits. Firms should appoint in-house general counsel, in whom lawyers (particularly young associates) could easily and confidentially confide if they have ethical questions about their own conduct or the conduct of others. Firms should set up procedures for routine in-house auditing of legal bills to catch fraudulent or inadvertent padding of hours before the client raises questions. Firms should provide for in-house ethics training to prevent lawyers from violating ethics rules because of ignorance. The empirical evidence shows that lawyers are less likely to engage in practices like double-billing once they know it is not allowed.

Court decisions should not make it more difficult for law firms to create structural incentives that encourage lawyers to get into the habit of following the rules that already exist. Thus, the attorney client privilege should protect lawyers who consult with other lawyers about their ethical obligations for the same reason that the privilege protects clients when consulting with their lawyers: confidentiality promotes candid advice.

Number of Pages in PDF File: 49

Keywords: CLE, malpractice, professional responsibility, inside counsel, outside counsel, bill-padding, anonymity, structure of large law firms, economic experiments, psychological experiments

JEL Classification: H32, K00, K19, K42, J44

Accepted Paper Series