Why Aren’t Lawyers More Affordable?

A recent article in The Atlantic asks: Is There Such a Thing as an Affordable Lawyer?. A provocative title, but how accurate is it?  And how useful are most of the suggested solutions —- which involve automating services or forcing solos and smalls to offer reduced rates and eliminating the “guild mentality” which of course, is responsible for all of the system’s ills — in addressing the scenario that opens the article:

Consider the case of Ned Henry, the plaintiff in a landlord-tenant dispute that’s commonplace in most ways—and curious in one.

In late 2012, Ned and his partner—recent tenants in an apartment in California’s East Bay—began to feel sick. Ned developed migraines and psoriasis, while his partner suffered headaches and nausea. As the winter progressed—more time inside, windows closed—the symptoms got worse. Eventually, they hit upon an explanation: toxic mold poisoning. They moved out and filed a lawsuit, both to avoid a penalty for breaking their lease, and to recover the costs that the mold and the move had imposed.

Ned and his partner didn’t have a lot of money—and the move had depleted their assets—but they weren’t exactly poor, either, so they looked into hiring a lawyer. They couldn’t, however, find anyone within their budget who would take their case. “It was definitely more than we could afford,” he told me over the phone last week. “Big range, depending on who we called, but at least $3,000-$5,000 on the low end, to start out.”

Because Henry and his partner couldn’t find an attorney in their budget, they proceeded pro se in small claims court. After more than a year, their case went before a judge and they won, though their landlord has since appealed.  In addition, during the course of the case, Henry discovered that his landlord had previously failed to disclose mold problems to a dozen or more tenants – most of whom gave up their fight to hold the landlord accountable. Henry attributes much of his success in small claims court to informal assistance that he received from his lawyer contacts, which he believes gave him a significant advantage.

Predictably, the article goes on to describe the high cost of lawyers – ranging from a low of $125 to $250 an hour and criticize the “guild mentality” that imposes a monopoly on legal services that keeps rates high.  But other professionals such as dentists or doctors charge comparable or higher fees — yet no one complains about the guild mentality and forced scarcity that keeps those prices high. That’s partly because of the availability of medical insurance which covers these costs. And even under the Affordable Care Act, health insurance isn’t cheap; many individuals probably pay around $3000 dollars a year which – surprise – is the same amount that Henry and his partner claimed they couldn’t afford to pay a lawyer. 

My guess is that Henry and his partner probably could have come up with $3000-$5000 to pay a lawyer. However, they chose not to because the amount that they would recover would probably cancel out the cost of fees. That’s true of many of the tiny legal matters now being automated. Most clients weight the cost and benefits of these smaller cases and decide not to pursue them.  That doesn’t necessarily mean that the cost of lawyers is too high but rather that the cost isn’t always justified by the value.

The article then trots out the usual suspects –Gillian Hadfield, cheerleader for licensed technicians and non-lawyer providers, Richard Granat on using technology to streamline and automate processes so that lawyers can compete with document providers and Rocket Lawyer’s  Charlie Moore who envisions his site as a place where clients can procure legal services at deeply discounted rates. And like most lawyers, I don’t oppose any of these options – but I also don’t think any of them would have helped Ned Henry.

Take for example, limited license technicians. I’m not sure that they would have provided Henry with better information than the small claims court clerks and likely, would not have uncovered or known what to do with the evidence of the landlords’ past violations.  In addition, although a licensed technician will presumably cost a fraction of what a lawyer charges and therefore is cheaper, the flip side is that a licensed technician adds to the cost of small claims courts which were set up so that consumers could handle these matters themselves.  To the extent that new services like ShakeLaw or non-lawyer technicians are being created to serve clients in matters where it was never cost-effective to use lawyers before, I don’t think that most lawyers would be troubled. However, isn’t the better solution to simplify the systems like small claims court that are supposed to serve clients rather than creating the legal equivalent of H&R Block, which many taxpayers use to complete their tax forms even though all H&R Block does is act as a middleman to what most consumers could do themselves.

As for the other two options, Granat’s Direct Law platform would have helped Henry and his partner to prepare forms to submit to small claims court but would not have spared them of the time consuming legwork – which incidentally, also drives the costs of legal services. As a result, it’s questionable as to whether the deeply discounted legal services offered through the Rocket Lawyer platform would have fit within Henry’s budget.  Even a rate of $100 an hour for 25 hours of work over a year long period amounts to $2500, which might not be worthwhile for a recovery of three or four thousand dollars.

What bothers me most about sensationalist stories like that in The Atlantic is that they blame lawyers for high fees without examining the underlying causes. My guess is that Henry and his partner probably had to show up in person 5-6 times over the course of a year to try to schedule the case or mediate a resolution. They probably had to messenger documents to the court because it doesn’t have e-filing and photo-copy all of the earlier cases against the landlord because they couldn’t be searched through the docket and printed out. Just as it takes time for laypeople to handle these tasks themselves, it takes lawyers time and added costs to handle them as well. In my own case, I would estimate that I save at least $100 in costs, and 15-30 minutes of time when I can e-file a document rather than printing it out, arranging for photocopying and pick up by messenger or Federal Express. In a case involving 10-15 filings, those costs can add up.

In addition, the article fails to suggest one of the more obvious solutions to the high cost of legal services: legal insurance products. Just like Ken Cuccinelli’s $10/month legal defense plan for gun owners that entitles them to the full cost of representation in a self-defense case, Henry and his partner could have been helped by a tenant defense plan – where apartment tenants pay a modest set amount – $10 or $20 a month – for defense against eviction or assistance with disputes against landlords. Of course, these plans work only with economies of scale – for example, a lawyer would need to sell 150 plans at a cost of $20/month to generate $36,000 but those proceeds would suffice to handle a dozen cases at at the $3000 rate. Still, it’s questionable as to whether tenants would pay for this added protection.

No doubt, the cost of legal services is too high for most consumers – and indeed, for many solo and small firm lawyers – to afford. But many factors account for these high costs besides legal fees and if we don’t focus the conversation on those factors as well, we may be left with a bunch of low cost providers and still not much in the way of savings or added value.