Lawyers get smarter as a state law requires continuation of education.

A state law that took effect exactly one year ago this month requiring California lawyers to take continuing education courses is creating a profitable new market niche for providers of legal education materials and courses.

Directors of the State Bar's continuing education program said they doubt anyone will get rich on providing continuing legal education in this recession-plagued environment.

But some established for-profit schools, especially those that have succeeded in other states where similar mandatory continuing education requirements have been placed on attorneys, insist the profit potential in California is alluring.

California's 110,010 licensed attorneys are now spending millions of dollars each year for registration fees, course materials and audio/video tapes. So far, individual law firms and state and local bar associations are offering the majority of courses. But for-profit schools are moving quickly.

Providers of continuing legal education fall into three basic categories: independent schools, bar associations and law firms that have set up in-house programs.

California law firms have traditionally encouraged their attorneys to take continuing education courses. But the California State Bar Minimum Continuing Legal Education program that took effect in September 1991 requires one-third of the state's licensed attorneys to complete at least 12 hours of classroom work by Jan. 31, 1993. Another third must complete 24 hours by Jan. 31, 1994, and the final third must complete 36 hours by Jan. 31, 1995, according to State Bar guidelines.

Of the 36 hours required for the three-year period, eight must be in legal ethics and/or law practice management. At least four of those eight hours must be in legal ethics, one hour in elimination of bias in the legal profession and one hour in substance abuse and emotional stress.

As of Sept. 4, 1992, the continuing education committee of the California State Bar had certified 759 of 1,079 applications received from providers. It had certified 888 of 1,460 "activity" applications, said Richard Lee, chairman of the continuing education program and a partner at the San Francisco-based law firm of Morrison & Forester.

Lee said applications by 118 providers and 347 activities are pending.

Activities can be offered by an approved provider who may not be an attorney as long as the attorney's legal skills or ability to practice law are enhanced. For instance, a tax attorney may be interested in attending a program for tax accountants. Any individual or institution that can get the activity approved by the State Bar of California Minimum Continuing Legal Education program is eligible.

"We were prepared to get 4,000 applications from providers last year, like they did in Texas back in 1986 (when that state started their mandatory continuing education program). But the economy is slow and I think some of the schools learned their lesson in Texas, lost money and decided to stay out of California," Lee said.

Already, the California Bar Association has approved as continuing education providers 238 law firms, 114 professional associations, 82 local bar associations and 75 commercial educators, according to state bar records. Other miscellaneous categories make up the balance of the providers.

"It's likely that the number of commercial education organizations and the number of courses taught by them will go up," Lee said. But he added that providing continuing education programs as an enterprise is risky.

"Most the major legal commercial continuing education providers in California lost money last year," Lee said.

Los Angeles law firms that teach their own courses are competing most heavily with schools such as Practicing Law Institute and National Business Institute.

Charles Ivie watches over continuing education for Gibson Dunn & Crutcher's 300 attorneys. "There is no shortage of programs. The Los Angeles County Bar Association offers courses for as little as $15 or $20 per hour," Ivie said.

Major Los Angeles law firms have always had continuing education courses for their barristers, taught either by their own experts or by outside teachers/attorneys.

"I think the program will have somewhat of a positive effect on the profession, but I don't think it will provide windfalls to schools," Ivie said.

For-profit school officials said that law firms, nonprofit organizations and bar association courses don't start to meet the demand created by the mandatory continuing education law. Therefore, they said, dozens of commercial schools will eventually get into the market.

California, New Hampshire and Pennsylvania are the latest of 38 states to demand a continuing education program of its attorneys. Some large firms have their own in-house education programs, but lawyers with small and mid-size firms could spend up to $600 per year each sending their partners and associates back to school, said Manny Pena, professional standards coordinator for the New York City-based Practicing Law Institute.

A school that gets even a small share of the market for the courses stands to increase its profits substantially, said for-profit providers. In the case of Practicing Law Institute, it had in the past year 200 California classes with 100 students per class, and each student paying $500 tuition, which adds up to a gross of $10 million.

"Most of our courses are taught in Los Angeles and San Francisco. We want to increase that number this year," Pena said. Practicing Law Institute confines its efforts to California, New York, Chicago, Dallas, Houston and Washington, D.C., Pena said.

Bob Berschinski, sales director for Sherman Oaks-based Rutter Group, said his 13-year-old continuing education company sees the new California law as a boost to profits from books and study-materials sales than from instruction.

"For instance, Rutter sells a basic 12-hour course in civil law procedure for $295, including the books. The guide sells separately for $220. If students bring their own materials, they get a $100 discount," Berschinski said.

Rutter Group is hoping to cash in on selling tapes of its course lectures, along with its books, to lawyers who are fulfilling their education requirements.

Sole practitioners and small-firm attorneys fill many of the seats in for-profit continuing education classes. Meanwhile, many of the large firms hold their own classes for partners and associates. But partners from big and mid-size firms do spend some money on for-profit schools as well, said Jo Frnette, an administrative assistant to Bill Nixon, a professor of Education Systems at Eau Claire, Wis.-based National Business Institute. Frnette said the big California law firms and the local bar associations underestimate the demand for outside courses.

"Fourteen of the 20 courses we have scheduled in California in November (this year) are for attorneys, and enrollment is growing," Frnette said.

Kenneth Dean, head of the continuing education program at the University of Missouri, said the demand for continuing education is steady in the state of Texas, as well; although the number of providers there has dropped.

"When Texas started a similar program seven years ago, thousands of schools registered with the state. Many of the new ones found out after a few months that they didn't have the expertise to survive, and the number dropped," he said.

Michael De La Rosa, director of the minimum continuing legal education department at the Texas State Bar, said continuing education course providers in his state, including law schools, bar associations and independent schools, have been turning a profit ever since 1986, when Texas began requiring its attorneys to take at least 15 hours of continuing education per year. The average charge in Texas is $185 for a 12-hour course, De La Rosa said.