The Shift Toward Law School Specialization

The twilight of the generalist law degree is here.

As Peter Lattman reported last week, New York University School of Law is retrofitting its third-year curriculum to allow for increased specialization. Options include advanced study in areas like tax or corporate law, working in Washington at a federal agency or foreign study in Buenos Aires, Paris or Shanghai.

While the study-abroad aspect of the program has received much of the attention, the heart of the proposal is an important shift toward specialization.

In the traditional model of legal education, schools offer a general professional degree in law. No majors or concentrations. Schools provide a strong foundation of legal analysis and grounding in the common law, on the assumption that law firms will teach new associates the specifics of what they need to practice law, whether that means drafting deal documents or taking a deposition.

In the emerging model, law students must add on a degree, certificate or other indication of readiness to engage in a particular practice area or industry. N.Y.U.'s strategy committee described this goal as providing “professional pathways that prepare students to operate in a world that demands increasing specialization.” (Full disclosure: I was a visiting professor of law at N.Y.U. in 2010.)

Law schools, like most established enterprises, change only when they have to. In this case, the ripples of change arising from the segmentation of the market for legal services have been felt by corporate clients, law firms and law schools.

Corporate clients are more savvy, sophisticated and cost-aware. Routine legal work is increasingly outsourced offshore, outsourced to contract attorneys or performed by professionals who do not have a Juris Doctor degree.

Law school graduates who fail to land one of the shrinking number jobs at big law firms find themselves moving down-market to small law firms for low pay, or compet ing with college graduates and M.B.A.'s for jobs in compliance, risk management or business development.

Law firms are struggling with the new normal of a segmented industry. The new economics of the profession are marked by increased lateral mobility among partners, increasing numbers of nonequity partners, increased client scrutiny of fees and a decrease in the routine legal work that used to support the pyramid model. As a result, it is harder for law firms to devote nonbillable time to training entry-level associates. Law graduates are expected to arrive knowing more than just how to “think like a lawyer.” The tricky part for law schools is trying to figure out what, exactly, they need to know.

In my view, law schools should play matchmaker, guiding students toward specialties that are likely to endure. Big firm attorneys in some practice areas will continue to have a comparative advantage over low-cost attorneys, in-house lawyers and other professionals. One area is bet-the-company litigation, where high stakes justify high fees. Another is mergers and acquisitions and securities work, where, in addition to negotiating and drafting documents, lawyers usually quarterback the deal to closing. A third area is any practice that demands highly specialized legal and regulatory knowledge, like bankruptcy, tax and financial regulation. The knowledge required is intrinsically legal and cannot be easily moved offshore or outsourced to nonlawyers or contract attorneys.

N.Y.U.'s shift toward specialization is more significant than it might appear. The school's lawyering program, which is mandatory for all first-year law students, will now include a module on business and financial literacy. N.Y.U. is also introducing an upper division course that will provide an introduction to statistics, accounting and quantitative analysis, which may be followed with additional courses on deals.

Other schools ought to consider a full fir st-year deals course, which could also provide a more comprehensive introduction to accounting and finance. But the first-year curriculum is the third rail of law school faculty politics â€" adding a smidgen of finance to the One-L curriculum is comparable to means-testing Social Security. It's a big step.

Brian Leiter, a well-respected scholar and leading figure in legal education, criticized this aspect of the N.Y.U. plan, noting that the financial literacy course “seems an important kind of course to make available to law students, but to require it seems to involve an assumption about career paths that isn't warranted.”

Few law students go into academia or become public defenders. But the more common narrative is for law students to arrive at law school with a vague notion of doing international or environmental law, then meander aimlessly around the curriculum. Eventually, realizing that gainful employment is probably a good idea, they find themselves in a job interview wondering what in the world a bond covenant is. At that point, offering an elective course in accounting and finance is too little, too late.

Tax can serve as a model for this shift toward specialization. The tax L.L.M., or Master of Law degree, is perhaps the one example of specialized legal education that has already proved successful for both schools and students, at least at the top programs. A tax L.L.M. builds on foundational law school training (unlike a master's degree in tax accounting), and it signals a breadth and depth of tax knowledge that cannot be readily provided by low-cost competitors. Even as the number of large law firm jobs has declined, tax L.L.M.'s have the option of competing for good jobs in accounting firms. Several schools now offer three-year J.D.-tax L.L.M. programs.

Could the same approach work in other areas of law that demand specialized legal expertise, like securities law, banking law or patent law? The critical question is whether there is sufficient market demand to supply an adequate number of jobs with six-figure salaries.

Promising areas are government relations, energy and regulated industries, health care, telecommunications and intellectual property, and financial regulation. There is a risk that schools will guess wrong on this question, leaving students with a useless certification. But the alternative to specialization is the status quo.

And the one thing we do know from the data is that private sector demand for smart but financially illiterate law graduates with a general professional degree and no particular industry expertise is, to say the least, dwindling.

None of this solves the broader problem at nonelite schools: the supply of law graduates simply exceeds market demand. The median salary of law school graduates at many schools is about $50,000, while average debt load is now over $100,000. As specialization takes hold, the next logical step is to lobby the American Bar Association to make the J.D. a two-year degree, with an optional third year of specialization for schools where that makes sense.

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For further reading on the current state of legal education, see Brian Z. Tamanaha's “Failing Law Schools” (University of Chicago Press, 2012).

Victor Fleischer is a professor at the University of Colorado Law School, where he teaches partnership tax, tax policy and deals. Twitter: @vicfleischer