Above the Law discusses administrative procedures to cut down on cheating at Syracuse University, and seems rather shocked that a law school would have closed book exams.
Loyola Law School switched to a closed book exam format just in time for the Class of 2008, figuring that it would be better preparation for the bar exam. While it is true that LLS's bar passage rates went up for the July 2008 exam, the same was true of all other law schools. In fact, bar passage rates went up significantly across the nation. The Stud has heard it said that the reason was that the multiple-choice Multistate Bar Exam (MBE), which is identical for all jurisdictions, had a very high passage rate. That, in turn, may be due to the fact that so many experimental questions ere thrown out.
In any case, the jury is still out on whether or not closed book exams improve bar exam performance.
Above the Law does make one good point, though:
Clients generally don't need you to be able to quote statutes and regulations off the top of your head (bar examiners, that's a different story).
The parenthetical sentiment is exactly why many schools have switched to such a format. Higher bar passage rates help a school's ranking, and are thus an important goal for many competitive law schools, particularly in the second tier.