Reconsidering Lawyer Autonomy: The Nexus Between Firm, Lawyer, and Client in Large Commercial Practice

• Author: Ronit Dinovitzer,Sally P. Gunz,Hugh P. Gunz
• Date: 01 September 2014
• DOI: http://doi.org/10.1111/ablj.12035
• Published date: 01 September 2014

Reconsidering Lawyer Autonomy:

The Nexus Between Firm,

Lawyer, and Client in Large

Commercial Practice

Ronit Dinovitzer,* Hugh P. Gunz,** and Sally P. Gunz***

INTRODUCTION

A preoccupation of commentators since the major financial

crises of the turn of this century and 2008 has been

questioning where were the gatekeepers,1the regulators,2the

*Associate Professor of Sociology, University of Toronto and Faculty Fellow at the American

Bar Foundation.

**Professor of Organizational Behavior, University of Toronto, Mississauga.

***Professor of Business Law and Professional Ethics, University of Waterloo.

The project upon which this article was based would not have been possible without the

financial support and advice of the Law Foundation of Ontario and Alberta Law Foundation,

and we thank them both. We also acknowledge the financial support of the University of

Waterloo/Social Sciences and Humanities Research Council program. Weare grateful for the

efficient and high quality work of our research assistant, Meredith Bennett. Wereceived very

generous help from many individuals. We thank Mr. Robert V. A. Jones who introduced us

to key members of the legal profession. The members of our advisory group of senior

practitioners for our pilot and main study, Mr. Jim Christie, Mr.George Glover, Mr.Tristram

Mallett, and Ms. Carol Pennycook, were invaluable to us and always gracious and generous

with their time and advice. We thank the managing partners of the law firms for allowing us

to approach members of their firms. Finally, we thank all the anonymous participants who

gave of their time and understanding.

1See generally JOHN C. COFFEE,JR., GATEKEEPERS:THE PROFESSIONS AND CORPORATE GOVERNANCE

(2006) (providing a thorough discussion of this question).

2See, e.g., Louise Story & Gretchen Morgenson, Financial Finger-Pointing Turns to Regulators,

N.Y. TIMES, Nov. 22, 2011, at A1, available at http://www.nytimes.com/2011/11/23/business/

economy/financial-finger-pointing-turns-to-regulators.html?pagewanted=all&_r=0.

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American Business Law Journal

Volume 51, Issue 3, 661–719, Fall 2014

© 2014 The Authors

American Business Law Journal © 2014 Academy of Legal Studies in Business

661

accountants,3the lawyers4whose public responsibility is seen to be guard-

ing against managerial decisions that undermine corporate wealth. While

professions might debate the use of the term “gatekeeper,”5they cannot

dispute that their members played active roles in the processes that led to

the financial crises. Managers, whether malevolent or simply negligent,

may not themselves provide the technical paper that wraps questionable

actions in the illusion of legitimacy. The regulatory regimes designed to

maintain healthy and open markets require compliance with complex

rules, and this compliance most often can be achieved only through the

services of highly skilled professionals.6

What the past ten years of academic research have confirmed is that

simple explanations for complex events are seldom available.7Certainly

3See generally Prem Sikka, Financial Crisis and the Silence of the Auditors,34ACCT.ORG.&

SOC’Y868 (2009); Floyd Norris, Accountants Misled Us Into Crisis, N.Y. TIMES, Sept. 10, 2009,

at B1, available at http://www.nytimes.com/2009/09/11/business/economy/11norris.html

?pagewanted=all.

4See, e.g., Sarah Kellogg, Financial Crisis 2009: Where Were the Lawyers?, DCBAR (Jan. 2010),

http://www.dcbar.org/bar-resources/publications/washington-lawyer/articles/january-2010-

financial-crisis.cfm. See generally Steven L. Schwarcz, Keynote Address, The Role of Lawyers in

the Global Financial Crisis,24A

USTRALIAN J. CORP.LAW 214 (2010) (providing a contrary view of

the role of lawyers as gatekeepers).

5COFFEE,supra note 1, at 192.

6Note, we are merely stating that accountants and lawyers are required to draft the docu-

mentation that is required by regulators. The debate surrounding whether they also should

be “gatekeepers” is more complex at least for nonaudit accountants and lawyers. See generally

Sung Hui Kim, Naked Self-Interest? Why The Legal Profession Resists Gatekeeping,63F

LA.L.REV.

129 (2011) (examining the arguments against the lawyer-gatekeeper and outlining the

resistance from the profession to such a role).

7See, e.g., Andrew W. Lo, Reading About the Financial Crisis: A Twenty-One–Book Review,50J.

ECON.LIT. 151, 173 (2012). Lo notes:

There are several observations to be made from the number and variety of narratives

that the authors in this review have proffered. The most obvious is that there is still

significant disagreement as to what the underlying causes of the crisis were, and even

less agreement as to what to do about it. But what may be more disconcerting for

most economists is the fact that we can’t even agree on all the facts. Did CEOs take too

much risk, or were they acting as they were incentivized to act? Was there too much

leverage in the system? Did regulators do their jobs or was forbearance a significant

factor? Was the Fed’s low interest-rate policy responsible for the housing bubble, or

did other factors cause housing prices to skyrocket? Was liquidity the issue with

respect to the run on the repo market, or was it more of a solvency issue among a

handful of “problem” banks?

Id.

662 Vol. 51 / American Business Law Journal

greed blinded many to the consequences of fool-hardy risk.8Undoubtedly

some managers, lawyers, and accountants engaged in unethical and some-

times illegal activity. But as with most events in history, causes are both

complicated and nuanced. It is our challenge to understand what allows

otherwise good people—here, “good” professionals—to be swept along by

ill-conceived currents. If we do not untangle this complex web, we are left

no better protected from the willingness of professionals to assist mis-

guided business ventures than we were earlier this century.

The context for this article is the practice of law and, in particular, the

practice of law in large commercial firms, since it is these lawyers and these

firms that dominate the delivery of legal services to major corporations.9

Of particular interest is the lawyer-client relationship and, more specifi-

cally, the role professional ethics plays in that relationship. The practice of

law is premised upon the assumption that lawyers are bound by and, for

the most part, comply with the codes of professional conduct laid down by

their profession.10 There is no doubt that from time to time lawyers

intentionally or unintentionally violate these rules; and it is the role of the

law societies or bar associations to step in and protect the public interest.11

8See, e.g., Rachelle Younglai et al., Financial Crises Caused by “Stupidity and Greed”: Geithner,

REUTERS (Apr. 25, 2012), http://www.reuters.com/article/2012/04/26/us-usa-economy

-geithner-idUSBRE83P01P20120426 (reporting on Treasury Secretary Geithner, “who

helped tackle the crisis for the Bush administration when he was the head of the New York

Federal Reserve and has been urging Europe to act more aggressively to contain its debt

problems”). Secretary Geithner also stated, “Most financial crises are caused by a mix of

stupidity and greed and recklessness and risk-taking and hope ....Youcan’t legislate away

stupidity and risk-taking and greed and recklessness. What you can do is make sure when it

happens it does not cause too much damage ....” Id.

9Note, even though there is evidence that, at least in the United States, clients have been far

more prepared to move work between firms, thus reducing the growth of the very largest of

commercial firms, it remains the case that large corporations use the services of prestigious

and often large commercial practices whether they be WallStreet firms (United States), Magic

Circle firms (United Kingdom), or Bay Street firms (Canada). For a discussion of changes in

U.S. law firms in particular, see Larry E. Ribstein, Delawyering the Corporation, 2012 WIS.L.

REV. 305 (2012).

10See generally Christopher J. Whelan & Neta Ziv, Privatizing Professionalism: Client Control of

Lawyers’ Ethics,80F

ORDHAM L. REV. 2577 (2012) (discussing ethics and the large corporate law

firm with a particular focus on the impact of the large client on ethics and professionalism).

11The Preamble of the New York State Bar Association provides that “[a]s an officer of the

legal system, each lawyer has a duty to uphold the legal process; to demonstrate respect for

the legal system; to seek improvement of the law; and to promote access to the legal system

and the administration of justice.” NEW YORK RULES OF PROF’LCONDUCT pmbl. (1) (2012). As an

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