Venture capitalist Fred Wilson thinks that’s too high a fee in a case where standard forms were employed and the other party wasn’t represented by counsel. Is it? Are there reasons to suppose a competitive market for a widely replicable legal service wouldn’t converge on some sort of market-clearing rate? [Above the Law]
More: Max Kennerly offers one lawyer’s view.
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I’d start with the observation that legal services is a heavily regulated market, where there exists significant barriers to entry (among the highest of all professions, second perhaps only to doctors), including a peer group of gatekeepers with significant incentive to restrict entry as much as possible.
Perhaps this specific service is simple enough that, even accounting for those factors, the price probably reaches equilibrium, but I don’t know enough about the the profession to get that specific.
I wrote a followup, linked via my name here, arguing (inter alia):
There’s an unspoken requirement in Fred’s reply: Fred doesn’t want just anyone to do that “stuff,” or else he’d ask someone at his office to do it. He wants a lawyer to do it.
Why?
Answering that “why?” also answers why it costs so much for lawyers to things that, on the surface, seems simple and routine.
…
Just as lawyers have a tendency to be negative and to spend what seems to be too much time on details, entrepreneurs and investors routinely spend months or weeks hammering out a deal and then call a lawyer to “finalize” it in the next few days or hours, sending the lawyer scrambling to figure out what the deal is even about, not to mention do their job in reviewing the details and contemplating the consequences. Fred wanted a lawyer to do his deal because he didn’t want just want the secretarial task of filling out the documents, he wanted a professional to calmly review the situation, carefully consider possibilities, and then candidly advise on the matter — all of which, if done right, takes time and thus money.
Some lawyers are trying to change that and offer piecemeal representation (for a reduced fee), but the law governing their liability and their ethical duties hasn’t really changed. If you want something less than that degree of service and responsibility, then you need to do-it-yourself. There’s not much of an in between.
Kennerly seems to overlook the lawyer’s incentive when Fred calls in a lawyer to put Fred’s deal into concrete terms. The lawyer has no stake in the success of Fred’s deal yet has liability in case something goes wrong with it–“Why didn’t you warn me this could happen?” So the lawyer’s incentive is to nix Fred’s deal. Had Thomas Edison consulted enough lawyers, we’d all be reading by candlelight.
Jack Olson, you blew your tag line. That should read “Had Thomas Edison consulted enough lawyers, we’d all be reading our computer screens by candlelight.”