Brian Tamanaha at Balkinization says the phenomonon of transferring is here to stay, and in a post heavy with detail, says there's a bright side:
It is understandable that schools on the losing end of the transfer phenomenon would perceive it negatively. But it has at least two positive consequences. First, it allows students who do well to maximize their employment opportunities by moving to a higher ranked school. Schools that lose students should not begrudge them this. (I willingly write transfer letters for my best students and I hope they succeed in the effort.)
Second, it is an avenue to partially correct the excessive weight law schools place on LSAT scores in the admissions process. Students who excel in the first year are just as capable as students at law schools ranked twenty or more spots higher (which initially denied them acceptance). In this sense, their ability was not correctly measured by their LSAT score. The transfer phenomenon constitutes a second sorting, with law schools making better informed decisions about the talent level of students.