Must Law Practice and Scholarship be Exciting?

dishwater dull with bubbleCauses of the worldwide credit crisis include, perhaps dominantly, the proliferation of innovative financial contracts, purportedly devices that would reduce financial risk but that instead backfired to concentrate and intensify it on a galactic scale. What role did corporate law culture play in this part of the cause? Was it too exciting? Should it be duller?

Beginning in the late 1980s, when I was in practice, I and other lawyers participated in incubating the market for financial derivatives and securitization transactions. In the beginning, these deals were nowhere near as exciting as the same period’s newly-exciting mergers and acquisitions and finance practices. We would prepare one-off interest rate swap form contracts on a small scale. We would package credit card accounts receivable into pools for sale to investors. But this practice area became increasingly exciting through the 1990s and 2000s as derivatives and securitization deals proliferated and came to form whole departments in law firms, rivaling mergers and acquisitions groups in glamour and revenue.

In the early 1990s, when I entered corporate law teaching, there was much exciting academic work being done, the culmination of what Yale corporate law scholar Roberta Romano heralded as a “revolution” in corporate law scholarship which, in the 1960s and 1970s, at least, had been dull. In that earlier period, the focus, in practice and the academy, was merely on positive, doctrinal law, mostly statutes, and on the old-fashioned duties managers owed to shareholders, often meaning practicing lawyers telling creative clients “no” when innovative ideas would violate longstanding duties.

Beginning in the 1980s, the focus in both turned to innovative deals, especially highly-leveraged hostile takeovers and what courts should do about them. Scholarship studied market behavior, looking empirically at deal effects on stock prices, how quickly and accurately information was absorbed into stock prices, how to measure investment risk and value. Important strands of this scholarship, and resulting law, urged facilitating these debt-financed deals.

In practice and scholarship, intensifying through the 1980s and into the 1990s, transactional and financial innovation was the rage. Corporate lawyers turned innovative, cutting edge, exciting, doing deals, developing new contractual devices for financial products—including those I worked on. Corporate law scholars took up finance theory with alacrity, doing exciting research showing how this innovation worked, with many producers and devotees of this work arguing how law should give it maximal space to flourish (though there were dissenters from this dominant view, including me).

As recently as 2005, Professor Romano, a leading scholar in this dominant style, urged doing more of it, more innovative financial engineering in practice and more finance oriented and exciting research in the academy. Professor Romano urged law schools to develop programs in law and finance to assist promoting this excitement, in practice and research, reporting how her school created a degree program in law and finance to seal the exciting links between law and finance and between cutting-edge law practice and legal scholarship.

Earlier this year, on a corporate law panel at the annual meeting of the Association of American Law Schools, though, Professor Romano said the program had attracted little interest among students. As Matt Bodie reports, panel discussion included talk of how the exciting finance models had failed and yet how problematic it is to design corporate law absent reliable empirical information. Professor Bodie wisely wondered whether these facts and lamentations spelled the end of the “revolution” in corporate law—a “post-post-revolution” period.

That makes me wonder, is it an inherent virtue for corporate law practice and scholarship to be exciting, or is being dull okay? Would the world be better off if more participants in corporate life were as dull as corporate lawyers used to be? Is it okay to tell clients “no, you can’t do that,” or, as I recall one stodgy old Cravath lawyer tell a client back in the late 1980s, “you can do that, but be prepared to go to jail”?

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6 Responses

  1. A.J. Sutter says:

    It’s hard to tell how rhetorical your question is, or how ironic is your use of “exciting,” so forgive me if I take them too seriously, or not enough. IMHO your question should be rhetorical, and your use ironic. Unfortunately, I don’t think enough people will see things that way (case in point, the Romano paper to which you link).

    Things can be exciting for different reasons. Developing new financial transactions can be intellectually stimulating, even though most of the beneficiaries of them may be jerks. Helping a small company with some “cookie-cutter” work might be a big deal for them, which they really appreciate. There can often be excitement, and even more often simply interesting work, in lots of fields that don’t rate headlines (or much attention from the legal academy).

    The abstract to the Romano paper raises some important questions. Reading it one way, it makes one question whether it’s the proper function of lawyers always to be facilitating business deals, especially imaginative and “exciting” ones. Interesting question, but the answer is obviously negative. I started practice as a corporate lawyer in the mid-1980s, too, and there were plenty of deals around that got headlines in AmLaw (which began as kind of gossip sheet about this sort of “excitement”) but that were of a dubious value that was obvious in real-time (such as the LBO craze). At least when I was in law school, one was taught that a lawyer is an officer of “the court.” I’ve never litigated, but that impressed on me that even transactional lawyers have some duty to think about the public weal, and the social consequences of their deals. A good way of to get some perspective on this is to consider Aristotle’s distinction between exchange value and use value, and his idea that true wealth consists only in the latter.

    Another way of reading Romano is from the perspective of law school as a vocational school, worried about “ensur[ing] that law school graduates will obtain the technical proficiency necessary to be at the leading edge of corporate law practice.” I think this is a red herring. First of all, law school has never taught much that’s useful for the details of Big Firm corporate transactional practice anyway; and that lacuna has never had much to do with the demand for graduates of any particular school. Second, implicit in this question is the view mentioned above, that lawyers should be facilitating financial innovations; this jobs-related reading just puts a more subservient and desperate spin on it. (I can’t speak to Romano’s proposal that a B-school or finance expertise at the same university can give a “competitive advantage” to a law school’s legal scholarship in the field; she may be right, but it’s a zero-impact issue for finance professionals and transactional lawyers.)

    Your last paragraph gets to the heart of the issue. But I don’t see this as a dichotomy between the exciting and the dull. It’s a dichotomy between two visions of the role of the profession: as part of a positive-feedback loop that can create social instability, or as part of a system of checks and balances that makes society more robust.

  2. Lawrence Cunningham says:


    Thanks for your thoughtful comments, with which I generally concur.


  3. Christa says:

    There is something accountant-like about the dull sort of corporate law that appeals to logical, risk-averse people. The exciting corporate law and finance makes me nervous, being a so-risk-averse-that-I-look-both-ways-before-crossing-on-a-walk-signal type. I think the profession has been scaring away risk-averse people for decades now.

    But, I do hope that that type of person will become common in corporate law again soon because the crisis resulted in a quiet call-to-arms for the risk-averse to rescue the profession.

  4. A.J. Sutter says:

    Christa, in my experience, the “dull” sort of corporate transactional practice isn’t necessarily accountant-like at all. Especially as one gets farther into it (i.e., beyond filing articles of incorporation and the like), it’s more like 60% psychology and counseling, with the lion’s share of the rest being about your client’s business, and the residual being about the pertinent law.

  5. Christa says:

    You would know more than I do about it. What I meant to say is that it appears accountant-like to those outside the profession, and that appearance draws the interest of some.