LawSites has just published a detailed summary of a new report by Stanford Law School’s Deborah L. Rhode Center on the Legal Profession on the state of regulatory reform five years after Arizona and Utah launched groundbreaking reforms to liberalize legal services regulation.
You can download or read the full report as a pdf document here or you can read LawSites summary here.
Above the Law is reporting (here) that the Utah Supreme Court recently released a plan to allow graduates of American Bar Association-accredited law schools to practice in the state after completing 240 hours of practice under the supervision of an experienced attorney, along with other requirements. This would open the door for graduates to avoid taking the bar exam. The ABA Journal has more on the story (and some links) here.
As posted in the Washington Bar Association's website:
As proposed, the pilot program on entity regulation would allow entities to provide legal and law-related services in Washington under time-bound, limited exemptions from the otherwise applicable rules and statutes governing entities practicing law. If approved by the Court, among U.S. jurisdictions, Washington would follow only Utah and Arizona in executing a plan to determine how the delivery of legal services by entities can be regulated in a manner that protects consumers and promotes broader access to legal services. Under the proposal, participating entities would be required to abide by a Supreme Court authorizing order detailing conditions on their participation, including adherence to rules of ethics and regular reporting of data and information relating to their delivery of services to the public.
You can provide feedback to the WSBA and Practice of Law Board during the next Board of Governors meeting Sept. 6-7 or via email at entityregulationpilot@wsba.org.
Go here for more information.
I have written about the notion of "wellness" before, including about a report on the negative effects of the practice of law and the fact that Vermont has adopted a comment [9] to its rule on competence which states that maintaining mental, emotional, and physical well-being necessary for practice is important aspect of competence.
Today I want to let you know that, earlier this month, the Supreme Court of Utah approved an amendment to the comments of Rule 1.1 of its Rules of Professional Conduct to add language about the mental, physical, and emotional health of attorneys. Here is the language of the new paragraph in the comment:
[9] Lawyers should be aware that their mental, emotional, and physical well-being may impact their ability to represent clients and, as such, is an important aspect of maintaining competence to practice law and compliance with the standards of professionalism and civility. Resources supporting lawyer well-being are available through the Utah State Bar.
Whether nonlawyers should have ownership roles in law firms has been and remains a hotly debated topic. The debate concerns potential reforms to Rule 5.4 of the American Bar Association’s Model Rules of Professional Conduct, which sets guidelines for maintaining the professional independence of lawyers, as well as the impact of those revisions on the legal profession. Although advocates for such reform argue that nonlawyers must be allowed ownership roles in law firms in order to foster innovation and increase access to legal services, many lawyers have raised significant concerns about the impact that nonlawyer ownership would have on the independence of lawyers. Lawyers have concerns about allowing nonlawyers—who have not sworn to uphold the ethical obligations that attorneys promise to uphold when becoming members of the bar—to have decision-making authority in the day-to-day practice of law. There is also no evidence that nonlawyer ownership actually improves access to justice for the needy. This Essay argues against rewriting Rule 5.4 to allow nonlawyer ownership of law firms. It concludes that nonlawyer ownership not only fails to solve the problems that advocates of reform promise it will address but in fact creates meaningful risks for the legal profession.
You can read the article here.
Long time readers of this blog know that one of the most debated issues in the past few years involves the question of whether the regulation of the profession should be reformed to allow lawyers to provide services in alternative business structures and whether to allow non-lawyers to provide some types of legal services.
You also know that the ABA continues to hold the position that lawyers should not be allowed to partner with non lawyers for the provision of legal services and that Utah and Arizona recently decided to take measures to depart from this traditional view.
What we do not yet know very well, however, is what effect have the regulatory changes in those states have had as it relates to the goal of providing more, better and more affordable access to legal representation.
Well, for those of you interested on the topic, more information is now available. Stanford Law School’s Rhode Center on the Legal Profession has drafted a report on the issue. The report, Legal Innovation After Reform: Evidence From Regulatory Change, is available here.
The report concludes, among other things, that the regulatory changes in Utah and Arizona are generating innovation in the ownership structure of legal services providers, which is not surprising since that was the idea to begin with.
This is a good thing, but on whether the other important goal has been met, the information is not so clear, nor consistent between the two states.
The main argument for broad regulatory reform is always that it will lead to more and better "access to justice", by which we really mean access to legal representation. But the experience in other states has shown that for varied reasons, the economics of the matter don't always lead to this result. Regulation that has opened the door to more service providers does not always result in lowering costs, and by extension, to more access to representation for those who can't afford it.
The new report has some data that suggests that the regulatory changes in Utah has resulted in more access than the changes in Arizona, and it is not clear (to me at least) that either has resulted in significantly more access to poor individuals.
None of this is to say that the regulatory changes should be rejected; I am only saying that we may need to think more about ways to achieve the goal of access to affordable representation.
You can read a comment on the report here.
Not too long ago, Lex Blog started posting links to a new Podcast called Legal Ethics Now & Next, and just a few days ago, the second episode became available.
This episode covers the so-called Utah's “regulatory sandbox," which they describe as a program that allows lawyers and other professionals to own legal service providers. The episode covers how the program works and what it might mean for the future of legal regulation.
You can listen to the program by going here.
Over the past year I have reported news about the important changes in Utah regarding the approach to the regulation of the practice of law, which include recognizing alternative business structures and the provision of certain legal service by people who are not lawyers. (Go here for all the posts on Utah.)
Along those lines, here is a short news item describing one of those new services. As the article explains, "[f]or individuals who cannot afford or otherwise don’t want to hire a lawyer, domestic violence victim advocates are now able to tell victims which protective order to apply for, how to correctly fill out forms, and what they should expect in court." Before Utah’s regulatory sandbox was adopted, these types of services could only be provided by lawyers.
Go here for the full story (which includes more links).
One of the most important stories of the last couple of years has been the debate over instituting changes to the regulatory regimes among the states. Washington stated abandoned its program of legal technicians while Utah and Arizona adopted significant changes allowing alternative business structures, non-lawyer services, and/or partnerships with non-lawyers. Other states, including California and Illinois have been considering proposals that include similar plans.
In that context, it is worth taking a look at a short article submitted to the State Bar of California in support of a proposed Paraprofessional Program which would authorize paraprofessionals to provide legal advice in areas such as family, consumer debt, landlord/tenant, employment/income, and collateral criminal cases, as well as represent parties in court (excluding jury trials). The article is called A Paralegal's Perspective on the Proposed California Paraprofessional Program and you can read it here.
October 17, 2021 (Updates at the end)
Back in 2018, I wrote about a couple of complaints filed in Florida that I argued could challenge the very notion of professional regulation. In one of them a law firm argued that a technology company was practicing law, while in the other the company challenged the notion of the regulation of the profession under antitrust laws. This second lawsuit (the anti-trust lawsuit) was dismissed, but the Florida Supreme Court just decided the first case. My original post about this topic is here, and I wrote an update here.
In my original post I explained that "TIKD is a company that promises consumers to take care of their traffic tickets (with a money back guarantee). The consumer pays a fee to the company and the company takes care of everything, including hiring a lawyer to represent the consumer. Based on this business model, a law firm in Florida filed a complaint with the Florida Bar alleging that TIKD was practicing law without a license."
At some point between then and now, the company went out of business apparently, but the case continued and in a 4 to 3 opinion issued on October 14, the Florida Supreme Court found that the company did engage in the unauthorized practice of law. You can read the full opinion here. The Legal Profession Blog has a good summary here. Faughnan on Ethics has a comment here.
The court provided a number of reasons to support its conclusion, but, to me, this is the more interesting one: "an inherent conflict and corresponding risk to the public arises whenever a nonlawyer like TIKD controls and derives its income from the provision of legal services. Like any other business entity, TIKD is motivated by a desire to maintain and increase profitability. When coupled with the provision of legal services to the public, there is a risk that such motives will eventually give rise to a conflict between the profit demands of the nonlawyer and the professional obligations of attorneys to act in the interests of a client. . . . TIKD is not subject to the Bar’s jurisdiction and, other than Bar discipline proceedings against individual attorneys, there is no means by which to protect the public or guard against such conflicts."
As you can see, this is the "traditional" argument in favor of banning lawyers from forming partnerships with non-lawyers for the provision of legal services. It is also the argument used against adopting new regulatory schemes such as the ones recently adopted in Utah and Arizona. A company like the one at issue here probably would be allowed to provide legal services as an alternative business structure in those jurisdictions today. (This is why I said back in 2018 that the issues raised by the case in Florida went to the core of the regulation of the practice of law.)
But, evidently, a slim majority of the Florida Supreme Court justices are not ready for such regulatory changes and imposed a permanent injunction.
In contrast, Justice Couriel offered a different view in dissent, arguing in part that TIKD did not practice law because it did not provide any legal services to the consumer. It merely provided a "portal" through which consumers could get (and pay for) legal services provided by Florida lawyers.
I understand this argument and it makes sense, but it does not quite address the issue of whether the connection between the lawyers and TIKD somehow created a relationship which allowed a non-lawyer to participate with the lawyer in the provision of legal services.
In the end, I think the question is more complicated than what the dissenters make it sound because of the limiting regulatory scheme within which lawyers in Florida are allowed to practice.
The question to address is not really whether this case is correctly decided -- it may very well be given the rules that apply now. The question is whether those rules should be changed. And the answer to THAT question is playing out in Arizona and Utah.
UPDATE 10/27/21: Lawyer Ethics Alert Blog has a comment here.
UPDATE 10/28/21: The Legal Ethics Advisor Blog has a comment on the decision here.
As I am sure you know, last year Utah and Arizona adopted significant changes to their approach to the regulation of the practice of law. Chief among these changes was the elimination of the ban on partnerships of lawyers and non-lawyers for the provision of legal services. The debate over measures like this one and over allowing "alternative business structures" for providing legal services has been going on for years, and much of the debate was based on data obtained by studying similar programs in the UK and Australia.
Now, about a year into the new era of regulation in Utah and Arizona, it is time to start looking at the date from the US. The Institute for the Advancement of the American Legal System (IAALS) is leading the way and in its initial report regarding Utah it says that numerous businesses and collaborations are up and running, providing a wide range of much-needed legal services. Of the 30 entities that have been approved by the Utah Supreme Court, 13 are considered as moderate risk, and one as high risk (considering both the likelihood of harm—as well as the degree of harm—that they might pose to consumers), but the IAALS considers the overall data so far to be very positive.
According to the recent report, "Utah’s sandbox has opened up a world of possibilities when it comes to how to practice law, and demonstrates how innovation, technology, and professionals who aren’t lawyers can work alongside attorneys and ensure consumers have real access to the entire spectrum of legal needs" and the report concludes that
We still have a long way to go and a lot of data to collect, but what we’ve seen so far does suggest that re-regulation has the potential to meaningfully increase access to justice and, importantly, the data shows that these kinds of innovations can be done safely. In just nine months, more than 2,500 people have received help with housing, immigration, healthcare, discrimination, employment, and a gamut of other issues. Lawyers are partnering up with other professionals to create new types of businesses, and technology is enabling them to do their jobs more efficiently. Instances of harm are rare—and, when they do occur, are being monitored and utilized by the Office of Legal Services Innovation to continually improve. As more states look to re-regulation as a means to increase access to legal services, the data from Utah’s sandbox—and the real people’s lives it is impacting—should be a strong push in that direction.
You can read more about the IAALS evaluation in their website.
The ABA's Standing Committee on Professional Responsibility and Ethics recently issued a new Ethics Opinion on whether lawyers may invest in law firms with non-lawyer owners. The opinion's summary reads as follows:
A lawyer may passively invest in a law firm that includes nonlawyer owners (“Alternative Business Structures” or “ABS”) operating in a jurisdiction that permits ABS entities, even if the lawyer is admitted to practice law in a jurisdiction that does not authorize nonlawyer ownership of law firms. To avoid transgressing Model Rule 5.4 or other Model Rules and to avoid imputation of conflicts under Model Rule 1.10, a passively investing lawyer must not practice law through the ABS or be held out as a lawyer associated with the ABS and cannot have access to information protected by Model Rule 1.6 without the ABS client’s informed consent or compliance with an applicable exception to Rule 1.6 adopted by the ABS jurisdiction. The fact that a conflict might arise in the future between the investing lawyer’s practice and the ABS’s work for its clients does not mean that the lawyer cannot make a passive investment in the ABS. If, however, at the time of the investment the lawyer’s investment would create a personal interest conflict under Model Rule1.7(a)(2), the lawyer must refrain from the investment or appropriately address the conflict under Model Rule 1.7(b).
You can read the full opinion (Formal Opinion 499) here.
You can read more about the opinion in LawSites and the ABA Journal.
UPDATE 9-19-21:
Faughnan on Ethics has a comment here.
The San Diego County Bar Association has a comment here.
UPDATE 10/10/21
Legal Ethics Advisor has a comment here.
As I am sure you know, one of the (if not the) hottest topics in Professional Responsibility today is the development of new approaches to regulation of the profession, including the significant changes approved in Utah and Arizona. The topic continues to be debated and here are two good sources of information.
In a short article published by the solo practitioners division of the ABA, the authors argue that Model Rule 5.4 is unnecessary because it causes more harm than it provides benefits to the profession and the public.
The article is one of several published in the magazine on subjects related to regulation reform, and Law Sites hosted a podcast in which five of the articles published in the magazine discuss their articles and ideas. You can listen to the podcast here or click on the play button below. The panelists discuss, among other things, Model Rule 5.4, whether lawyers should be allowed to share fees and partner with non-lawyers, the regulatory changes in Utah and Arizona, and the now abandoned Legal Technicians program in Washington state.
As I am sure you know by now, Utah and Arizona recently became the first two states to make changes to their regulatory structure to allow, among other things, lawyers to partner with non-lawyers, non-lawyer ownership of law firms and alternative business structures. For my previous comments on this go to the section of the blog on news from Utah and the one for Arizona and scroll down for lots of stories.
In one of those stories I reported that Utah had approved the first non lawyer owned law firm in the state back in March, and that Arizona had approved some alternative business structures.
Today I am reporting that the Arizona Supreme Court has approved three entities to be licensed as alternative business structures, enabling businesses owned by non-lawyers to deliver legal services.
The first two, approved back in March are Trajan Estate, LLC, a legal service provider focused on estate planning and Payne Huebsch, PLC, a firm that provides transactional legal services combined with tax and accounting advice.
The most recent entity, approved on April 22, is Arete Financial LLC. which will provide accounting and tax services, and legal services in the areas of trust, probate and corporate transactional.
Law Sites has more details.
It is interesting to note that the main argument to allow for alternative business structures is always that it will result in better/more access to legal services to those whose needs are not met. Yet, if you look at all the alternative business structures created so far, it really does not sound that any of them are dedicated to do that. They all seem to be boutique firms to provide services for wealth management (ie, clients with wealth).
Meanwhile, Utah seems to be taking a different approach. There, two non-profit pilot programs secured approval this week under Utah’s regulatory sandbox to provide non-lawyer legal assistance to individuals with medical debt. That sounds more like providing access to justice.
One recurring story last year was the number of lawsuits filed throughout the country challenging the authority of states to mandate membership in bar association groups in order to be allowed to practice law. Go here and scroll down for the stories I posted on this topic. Typically, the claims are based on the fact that the bar association supports causes the individual complaining member would rather not.
Well, it happened again. Courthouse News Service is reporting that a Utah attorney has sued the state bar association claiming it spent mandatory dues on political and ideological speech she disagrees with in violation of her First and 14th Amendment rights.
At last count, I have heard of current challenges filed in Texas, Oklahoma, Oregon, Wisconsin, Louisiana, Washington and Michigan. The Wisconsin challenge was defeated and the Supreme Court denied cert. The Oregon case was recently remanded by the Court of Appeals. I do not know the status of the others.
As you probably know, last year Utah and Arizona adopted new rules to fundamentally change the way the practice of law is regulated, including allowing lawyers to partner with non lawyers to practice law and allowing certain non lawyer owned entities to provide legal services. For more on this go here, and here.
I am writing about this again today because Law360 just published a short comment on the situation in Utah, where . . . "the group of approved participants includes LawPal, an entity planning to offer a "TurboTax-like" platform for divorce and eviction disputes, and 1LAW, which helps clients complete court documents and offers related legal advice through tech including chatbots. A pro bono service provider in Utah is also seeking approval to permit domestic abuse victim advocates to give legal advice while filling out protective order requests. . ."
A few days ago I reported that the era of non-lawyer owned firms is here, now that Arizona and Utah have approved some version of such an alternative business structure.
As I have written elsewhere, the debate on whether this is a good idea is not new. (See here, for example). What is new is that these two states have decided to give it a try. And, not surprisingly, this has reinvigorated the debate again.
One of the main arguments used to justify opening up the practice of law to non-lawyers (whether by allowing non-lawyers to provide some types of legal services or by allowing lawyers to get capital from and to partner with non-lawyers, or by allowing non-lawyers to “own” law firms) is that it will provide more “access to justice.”
This notion of “access to justice” is, of course, a misnomer, since there is no guarantee of that. What we should be asking is whether the new regulatory system will provide more access to legal services, or, better yet, to affordable legal services.
Unfortunately, there is no evidence that it will, and if we go by the experiment with Legal Technicians in Washington state, there is evidence that it won’t work.
Although the new business models may provide more access to consumers, they won’t necessarily reduce the cost of legal services, prevent conflicts of interest or guarantee competent representation. That is so because the new non-lawyer owners of the law firms are in the business to make a profit. They need a good return for their investment and that margin is likely to come out of the difference between costs to provide the services and the fees that can be generated.
Unfortunately, maybe this means that companies more interested in making a profit than in providing wide ranging legal services will devote their attention to reviewing would be clients’ claims in order to find only high value cases, while the others will be swept aside or will not be given the attention they deserve. Thus, depending on how the new model is structured, it may result in clients with smaller cases actually getting less access to legal services.
But, let’s not rain on the parade. We won’t know how it will work until we try it so let’s see what happens in Utah and Arizona. Maybe they can make it work better than Washington could. I am sure we will be talking about this for a long time. And, as some have said, maybe this is an inevitable shift in the legal services market, in which case, just wait, it will soon be coming to a jurisdiction near you.
As I am sure you know by now, Utah and Arizona recently became the first two states to make changes to their regulatory structure of the practice of the profession to allow, among other things, lawyers to partner with non-lawyers, non-lawyer ownership of law firms and alternative business structures. I reported on those developments here and here (regarding Arizona) and here, here, here and here (regarding Utah).
And, here is the latest: Yesterday, the first entirely nonlawyer owned law firm in the United States opened for business in Utah while the Arizona Supreme Court announced (news release) that it has approved the first two alternative-business structure entities to operate in the state. The ABA Journal has a story from Utah.
Back in September of 2020 I posted a few comments and links on the recent regulatory changes in Arizona and Utah which opened the possibility of allowing non-lawyers to provide some legal services and to partner with lawyers to provide legal services. See here, here and here. As you know, the debate on whether it is a good idea to allow such partnerships goes back a long time and relates to the prohibition in rules like Model Rule 5.4, originally thought to be needed to protect the public from the dangers of having lawyers forming partnerships with non-lawyers.
I am writing about this today because I just saw a a short article from a few days ago that provides a little bit of background and commentary on the changes in Utah. It is published in Law 360 and you can read it here.
The Utah Supreme Court announced that it has approved five entities to enter the legal market under its new regulatory scheme. The Lawyer Ethics Alert Blog has more on the story here.These entities are:
LawHQ: A Salt Lake City law firm which plans to offer equity ownership to certain software developers in the firm and a software application called CallerHQ, which is designed to allow consumers to report spam telephone calls, text messages and voicemails. Consumers who sign up may then be included in a mass tort litigation brought by LawHQ against the spammers.
1Law: An entity which plans to provide no-cost and low-cost legal services to assist clients in completing court documents and also offer related legal advice using chatbots, instant messaging, automated interviews, nonlawyer staff and technology-assisted lawyers. 1Law plans to have more than 50% nonlawyer ownership.
LawPal: An entity which plans to provide a TurboTax-like technology platform to generate legal documents in contested and uncontested divorce and custody cases, eviction cases and debt-related property seizure cases. It expects to feature 50% nonlawyer ownership.
Blue Bee Bankruptcy Law: The sole owner of this law firm states that he will give his paralegal employee a 10% ownership interest in the firm as an incentive to remain with the firm.
The last entity is better known. It is Rocket Lawyer, a company that does not seem to understand (or at least does a very bad job of explaining) the difference between the notion of confidentiality and the attorney client privilege (see here), which offers to connect clients with available lawyers. The ABA Journal has the story.
The Court's full order is available here.
