The Death of Big Law

Larry E. Ribstein, University of Illinois

Abstract

Large law firms face unprecedented stress. Many have dissolved, gone bankrupt or significantly downsized in recent years. This paper provides an economic analysis of the forces driving the downsizing of Big Law. It shows that this downsizing reflects a basically precarious business model rather than just a shrinking economy. Because large law firms do not own durable, firm-specific property, a set of strict conditions must exist to bind the firm together. Several pressures have pushed the unraveling of these conditions, including increased global competition and the rise of in-house counsel. The large law firm’s business model therefore requires fundamental restructuring. Combining insights from the theory of the firm, intellectual property, and the economics of legal services, this paper discusses new models that might replace Big Law, how these new models might push through regulatory barriers, and the broader implications of Big Law’s demise for legal education, the creation of law and lawyers’ role in society.