April 10, 2013
NEW TECHNOLOGY PRESAGES MAJOR CHANGES IN "LAWYERING"

ANALYSIS & OPINION BY RUSS STEWART

"The first thing we do, let's kill all the lawyers." That was the exhortation in Shakespeare's "Henry VI." What the famed playwright imagined in prose, technology, in conjunction with demography, is on the precipice of accomplishing. For America's 1.2 million attorneys, and the 44,000 annual law school graduates clogging the profession, there is good and bad news.

The good news is that the torrent of budding lawyers will soon diminish to a trickle. There are too many lawyers, too few jobs. There is demand for doctors and dentists, not lawyers. Of the 40,000 people who pass bar exams yearly, only 24,000 find law-related jobs. Unlike sports, rookie lawyers don't readily replace seasoned veterans, and vets practice into their 70s.

The bad news is that, in the near future, demand for legal services will dramatically diminish. Emerging technologies are not lawyer-friendly.

Smart cars: Imagine an automobile that has the GPS computer capacity to drive wherever one orally directs it, hands-free and accident-free. That technology, with a directional computer chip in every car, is being developed, with current models able to issue collision warnings when backing or parking. By factoring out human incompetence, negligence and intoxication, smart cars will render obsolete the lucrative personal injury, DUI, traffic and criminal defense market. By 2025 or soon thereafter, there won't be auto accidents, personal injuries or property damage to litigate, nor infractions for drunken driving, speeding, running red lights, illegal turns or driving without a license.

In fact, with smart cars, you won't need a license, or even insurance. A car will be a "means of transportation," the owner a commuter, and only the owner will be able to activate the computer. The government will monitor and regulate ownership of each means of transportation, and satellites and computers will track the origination and destination of every vehicle. Imagine the potential for crime-solving or divorce-enhancing. "Big Brother" will know the exact location of one hundred million people at every moment of every day.

Of course, the livelihoods of a hundred thousand lawyers will be obliterated. DUI, traffic court and criminal defense lawyers will be superfluous, as will judges, prosecutors and public defenders: Why represent anybody who used their car to commit a crime? The proof is incontrovertible. If a fingerprint or voiceprint is needed to activate the means of transportation, auto theft will disappear and convicted criminals will be banned from driving.

Also, no more undocumented immigrants driving cars, or somebody using another's car, or supposedly injured people driving, or errant spouses scheduling assignations.

Before 1990 the insurance industry's philosophy was to capitulate, not to fight. For major fractures, soft tissue injuries -- which are easy to fabricate and difficult to disprove -- and property damage, insurers settled quickly, based on the formula of "two-and-a-half times specials." That was provable medical bills and lost wages, with attorney fees and "pain and suffering" built in. Now every insurer, especially the substandard, litigates almost every claim. Liability must be proven, entailing copious legal fees, three years of discovery, depositions, pre-trials and, usually, just before trial, a settlement, with the lawyers taking a one-third contingency, plus costs.

With smart cars, there will be no driver liability. If an accident occurs, the lawsuit will ensnare the manufacturer or the GPS satellite system. Fewer accidents means diminished medical bills, which means that "P.I." law firms will suffer.

Workers' compensation: Kentucky recently passed a law capping attorney fees at $2,500 for work-related injury claims. The number of claimants represented by a lawyer dropped by 75 percent. The dollar amount of each settlement declined almost 50 percent. Workers' comp is insurance paid by employers, so lower premiums mean higher profits and, theoretically, more money to invest in capital expansion, inventory, new jobs or more taxes.

The Illinois Workers' Compensation Commission handles worker claims, and the claimant receives temporary total disability equal to two-thirds of his or her weekly wage. The employer and the employee submit a medical report. The employee collects disability until either a hearing on the merits of the case or both doctors concur on the return to work. As long as the worker collects temporary disability, the insurer pays all the medical bills. Compensation for "loss of use" is governed by statute. For example, the loss of one digit on one finger or a spinal injury with a permanent 40 percent disability each are worth a specific amount. Lawyers have no incentive to quickly settle, as they get 20 percent of the final amount -- the "loss of use" figure plus the other third of lost wages.

In Kentucky, with the $2,500 attorney fee cap, workers' comp attorneys virtually vanished.

Foreclosures: Remember the good old days, prior to the Great Recession, when home owners lived in abject fear of their mortgage lender? People thought: I can't miss a payment. If I do, I will lose my house next week. I will destroy my credit. I won't be able to buy another home.

By 2009 everybody had an epiphany. The new reality was: My house is worth less than my mortgage. I can avoid 12 to 48 monthly mortgage payments. I can live mortgage- and property tax-free for more than three years. I can "save" $1,000 a month. So what if my credit has tanked? I don't have a job. I can't sell my house. I can't plunk down 25 percent to buy another house. So what? Screw the bank.

Banks and lenders discovered that the minimum real cost of a residential foreclosure is $50,000 to $100,000, with commercial and apartment building foreclosures higher. That includes lost principal and interest, unpaid property taxes, attorney fees, pre-possession vandalism and stripping, and post-possession maintenance. They got smart. They axed the lawyers.

Loan "modifications" are the rage, because they're between the lender and the borrower, making the latter current or extending the loan -- without lawyers. Time-consuming "short sales," spanning six or more months, get money to the banks, minimizing attorney fees. It's a well kept secret, but major banks with extensive mortgage loan portfolios are expending more than $500,000 a month in foreclosure attorney fees and losing upwards of $20 million a month in uncollected and uncollectible mortgages.

The legal system is not bank-friendly. The first six months after foreclosure filing requires mandatory "mediation." A borrower with a lawyer can delay the case, with discovery, for three years. The banks' attorneys eventually get a summary judgment, validating the delinquency. A sheriff's sale is set and held, with the lender buying the property for the amount due. It's then approved, and a deed is issued. Then an eviction is filed, which a jury demand can delay for six months. Finally, an order for possession is granted, and the bank has an asset which cannot be sold, is removed from their books at the pre-foreclosure value, and must be maintained.

Debt collection and small claims: Hard economic times used to generate an avalanche of litigation. Not any more. In the past, lawyers took debt collection cases on a one-third contingency plus costs as their fee, and then garnished bank accounts, property or wages after judgment. But what if "deadbeats" lack money or jobs? Now lawyers demand to get paid hourly to collect the uncollectible or the debtor skates, usually filing an inexpensive bankruptcy, discharging all credit card debt.

That's the reality. The Daley Center's 11th floor, where cases of less than $50,000 are heard, and Courtroom 1401, which handles wage and nonwage (bank) garnishments, are ghost towns. Creditors have ceased wasting legal fees. The only litigators are collection companies, who purchase credit card indebtedness for pennies on the dollar and hire high-volume attorneys who hope to score on a few cases.

Even bloated corporate America is scrimping. Breach of contract lawsuits, particularly in federal court, are a third of pre-2006 levels. The philosophy is: Write it off as a bad debt. Don't waste diminished cash flow on attorneys.

Real estate: There are no full-time real estate lawyers any more because there are few real estate closings. They're now general practitioners. Nobody is "flipping" houses every three years. That won't change any time soon. Of current closings, 70 percent are short sales, 15 percent are foreclosures, and 15 percent are straight sales to qualified purchasers. Paralysis reigns. Property owners won't sell because their values are so ridiculously low that they can't swing an upgrade, and lenders won't loan unless the buyer has a 25 percent down payment.

 Probate: Self-declarations of trust have eclipsed wills as the estate-planning norm. People prefer to pay upfront trust fees now, avoiding probate and attorney fees later.

Two areas have shown notable growth:

Guardianships: The aging of the Baby Boomers' parents was manageable; the looming glut of aging Baby Boomers isn't. The probate courts are already being overwhelmed with 70-something boomers whose kids want to grab their assets, have already grabbed their assets, or want to dump dear old Mom or Dad on Medicaid. Practitioners of "elder law" will flourish.

Divorce: The "me" generation still is. In most divorce courtrooms, almost a third of litigants are representing themselves because they can't afford a lawyer. But divorces are surging in the 50-plus age bracket, especially with second marriages. Their philosophy: I'd rather be alone than miserable.

Here's my advice: Don't go to law school.