August 22, 2008
Teaching Transactional Law
Posted by Rob Illig

Day 5 as a guest blogger - I'm really enjoying Gordon's meditations on teaching (as well as Stephen Bainbridge's), and I'm learning a lot.  But I think they're also important in that they signify that something larger is afoot.  It may be the Carnegie Foundation report, or perhaps just the growth of a critical mass of former dealmakers entering legal academia, but I feel as if the teaching of what is generally thought of as transactional law is finally getting some serious attention.  As Tina Stark mentioned in an earlier post, Emory just hosted a well-attended and very successful conference on the teaching of transactional skills (where I met both Gordon and Usha).  Meanwhile, the University of Washington has a similar conference planned for early September, and next summer's mid-year meeting of the AALS business law section will have a significant teaching emphasis as well.  Thus, I feel as if we're in the midst of a "moment" during which some serious people are re-imagining (or at least open to re-imagining) what it is that we do.

As I've given this a fair amount of thought lately (I spoke at Emory and will again at the AALS meeting this summer), I thought I'd share a few of my own ideas on teaching transactional law in what is admittedly a fairly long and meandering post.  Most importantly, I believe, we need to get comfortable with the notion that upper level business courses are not the place to be teaching basic legal analysis.  I agree wholeheartedly with Bainbridge (and Gordon?) that, if students aren't "getting it" during the first year, there's little I can do to help them in a course like Business Associations or M&A.  But this partly misses the point and so mis-diagnoses the problem.  The real issue that I see is that law school is three years but, by Bainbridge's own analysis, most of the important learning is completed by the end of year one.  What keeps me up at night is wondering why, if the goal is merely to teach students to "think like lawyers" (feel free to insert "litigators" or "judges" if you prefer - and I do); why is law school three years?  What value do the second and third years provide?  Clearly, the general answer must be that the goal of law school isn't merely to teach students to think like litigators.  There must be something more that we do (or should do) during the second and third years.

My answer, then, is that we have to strive to teach something different.  But it is not enough to merely teach additional or different content.  The second and third year of law school should not be an extended (and expensive) BAR/BRI course.  Instead, we should be attempting to teach a different way of thinking.  Just as the first year of law school seeks to immerse students in a new problem-solving methodology, the second and third year should attempt to achieve something equally as profound.

So what can we do/teach that is different.  There are really two answers to this.  The first is skills - law as a craft.  The second is teaching students how to "think like a transactional lawyer."  Note, then, how this simple notion re-conceives the law school experience:

  • Year one = learn how litigators and judges use legal reasoning and analysis to resolve disputes;
  • Year two = learn how businesspeople and transactional attorneys use law (as well as finance and economics) to identify, assess, minimize, and avoid risk and uncertainty; and
  • Year three = learn the skills that litigators and transactional attorneys rely upon in their day-to-day practice.

If this conception is roughly correct - and it certainly is not at the margins, only in its general, broad scheme - it suggests to me that the litigation-oriented faculty at most law schools is already doing a terrific job.  Few can doubt that the first year of law school, through some magic recipe that no one quite understands (and that should probably not be examined too closely lest it be somehow contaminated), does a fine job of teaching students to think like litigators.  Then, if your law school is at all like mine, the second- and third-year curriculum is replete with litigation-oriented skills courses like trial practice, appellate advocacy, advanced legal research, negotiation and mediation, not to mention experiential opportunities like judicial externships and moot court competitions.  What seems to me to be less certain is whether we on the transactional side our doing our jobs.

Today, then, I'll give a few thoughts on what I think a second-year transactionally oriented course like Business Associations should encompass.  On Monday (which, alas, is probably going to be my last day as a guest blogger), I'll share some additional thoughts on how we might go about teaching transactional skills in the third year of law school.  Hopefully, I'll turn all this into an article of some sort (did I mention that I'm up for tenure this year?).

To my mind, the key to approaching the question of how to teach students to think like a dealmaker is to conceive of the discipline more as craft than science.  We must read cases - if indeed it is cases that we read - not to identify or assess the law, but to ask questions like "why did the parties end up in this mess?" and "how can we help our clients avoid this and other similar messes?"  For us, the cases and the law are merely the starting points.  I tell my Business Associations students on the first day each year that the "law" has only partial interest for me.  Instead, I care much more about the process.  Just as the first year of law school is intended to immerse students in how lawyers argue and judges decide cases, my transactional law courses are intended to immerse students in how businesspeople think and behave and in how lawyers deal with uncertainty.  For me, then, the law is just one more uncertainty that lawyers help their clients deal with (as in "I cannot tell you for sure that doing x will not invite litigation nor that we would be certain to prevail; therefore, you the client must either factor into your decision the possibility of such litigation or I the lawyer must help uncover a different, more certain strategy that will lead to the same or a better result").  Certainly, knowing how to think like a litigator is absolutely critical for transactional lawyers in that it enables us to (a) identify legal uncertainties, and (b) do the research and analysis necessary to assess the level of uncertainty and, hopefully, to minimize the degree of uncertainty.  That is why no transactional teacher should question the value of focusing the first year on litigation-oriented legal analysis.  Mastering litigation must come first.  However, for the transactional attorney, it is merely the beginning, not the end, of the endeavor.

What this suggests to me is that we should be talking a lot about business.  Certainly, I include a lot of economics and finance in my courses, but I try to avoid making it just theory.  Instead, I focus our discussions on practical business questions.  For every case, I ask what the risks were that the parties were faced with, and how they managed (or failed to manage) those risks.  To take an example from next Tuesday's class, when we discuss veil piercing, we spend less time on the theory and legal rules and more on the fact that limited liability is a mirage for most small businesses given that lenders and other significant creditors invariably require a personal guarantee or some other collateral.  Likewise, when we discuss double taxation, we also discuss planning techniques that enable small (and large) businesses to avoid the second layer of tax.  Law matters, certainly, as does finance theory.  But the practical implications of a creditor's risk of non-payment may well trump all.

And no, I don't lecture.  Although I am open to a lot of experimentation and doubt there is one "best" way to teach, and although I give my share of mini-lectures as introductions or wrap-ups or on particularly difficult issues, I mostly ask questions.  Lots of questions.  And mostly questions that the students have no business knowing the answers to (at least not until I'm finished with them).  Just as we begin the first year by immersing students in questions they never considered before but that, with repetition, quickly become familiar, I do the same in Business Associations.  I start with things like "why did the parties enter into this particular transaction?" and "what were they hoping to achieve?"  "What risks were they concerned about in choosing this particular course of action?" and "did they successfully navigate those risks?"  "What could they have done better?"

What I strive to do in my transactional courses is help students gain a feel for how to manage uncertainty.  Again, my real goal is to help them "think like a transactional lawyer."  Just as (most) students complete the first year of law school with a sort of intuition about how law works - can't we all pretty much predict what the law is within a certain area even if we know nothing about it? - I want my students to gain a sort of intuition about dealmaking.  I want them to value things like certainty, price, timing and social issues.  I want them to gain a feel for how a regulation or contract provision can be manipulated or avoided by unscrupulous (or sometimes by very scrupulous) lawyers and clients.  I want them, above all, to be experts in uncertainty - how to spot it, assess it, minimize it, and avoid it.  If I can do this, then I feel that the second and third years actually have value and that I am teaching something that the students don't already know.  This is all very had to pinpoint and even harder to describe, but I hope my meanderings at least provide a partial idea.  By keeping the goal always in mind, I think the process - and I'm sure there are many equally successfully processes - will be fairly easy to capture.

As a final note, we should remember that we also need to prepare our students to interact successfully with businesspeople, something they may not have done before.  In part, this means helping students - especially those with little or no background in business - to learn how businesspeople think and make decisions.  However, vocabulary and lingo are perhaps equally important.  To make this point, I joke each year that business law students should practice looking into a mirror and keeping a straight face while saying words and phrases like "synergies," "core competencies" and (here I think I may be dating myself back to the dealmaking days of the Internet boom) "bricks to clicks"  and "the new new thing" ...

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