On the Future of Law: Comments on the ABA Futures Commission's Issues Paper

Sands McKinleyBy Sands McKinley, Founder

On November 3, 2014 the American Bar Association's (ABA) Commission on the Future of Legal Services released an Issues Paper which solicits comments from the public. The paper includes numerous issues regarding access to affordable legal services by the public at a time when technology and globalization are changing the landscape of the legal industry. While all of the questions raised by the Commission in the Issues Paper are significant, this blog post sets out to provide comments on one primary subject: Alternative Providers and Regulatory Innovations.

ALTERNATIVE PROVIDERS AND REGULATORY INNOVATIONS

The Commission asks three questions regarding this topic. First, will access to legal services be improved if the pool of providers is expanded to include people without a JD? Second, to what extent should those who are not licensed to practice law be permitted to have an interest in law firms? Third, what other kinds of regulatory innovations in the US or other countries could help improve access to and delivery of legal services?

These questions fundamentally shine a light on the existing regulatory framework. Instead of assuming that existing ethics rules have been, until now, sensible and altruistically well intentioned, the Commission should first objectively question the fundamental logic and purpose behind each rule, and whether the rules support or hinder the needs of society.

According to Professor James Moliterno's book American Legal Profession in Crisis, [1] since its inception, the bar (as a representative of the legal profession) has frequently focused its energies on maintaining the status quo, whether that is maintaining the homogeneity of the members of the profession, preserving 19 th century civility, or limiting competition.

Law students are taught these rules as if they miraculously appeared in carven stone and can, unblinkingly, recite the purported reasons for each rule. For instance, "5.4 is meant to preserve the independent judgment of lawyers." But a closer look at the bar's history reveals other motivations. [2] In fact, ethics rules were often intended to prevent access to legal services or to stall or prevent changes within the profession brought on by unwelcome changes in society. [3]

With respect to non-lawyer ownership in law firms, the 1908 Canons did not prohibit non-lawyer partnership with lawyers or ownership in law firms. Rule 5.4 was not adopted until 1983. Interestingly, an early draft of rule 5.4 recommended that, "non-lawyers be permitted to form partnerships with lawyers if there would be no interference with the lawyers' independent professional judgment or with the client-lawyer relationship, client confidentiality would be maintained, and any advising and fee arrangements did not otherwise violate the rules governing lawyers," but it was rejected when it was asserted that Sears could own a law firm. [4]

I would argue that 5.4 is not really about maintaining a lawyer's professional independence, it is about maintaining the lawyer monopoly over financial interests related to the delivery of legal services. Ironically, the monopoly intended to prevent competition is now making lawyers and law firms less competitive in a changing marketplace. This is particularly unfortunate because lawyers teamed with experts in other disciplines and fueled by investment capital are in an especially powerful position to create new and innovative approaches to the delivery of legal services, from the most basic to the most complex.

We need to accept that non-lawyer participation in law firm ownership and investment does not in and of itself give rise to an interference with a lawyer's judgment or otherwise put clients at risk, [5] that lawyers in private practice are also motivated by profit, that the successful practice of law is often correlated with the successful operation of a law firm's business, and that both greater access and higher quality legal services would be promoted through a more multidisciplinary and modern approach to the delivery of legal services and the business of law. While LegalZoom, Axiom Law, Rocket Lawyer, and other non-law firm legal service providers innovate and advance, current regulations prohibit lawyers from pursuing alternative business models that would allow firms access to the same sources of capital and multidisciplinary talent, which puts innovative and business savvy lawyers at a distinct competitive disadvantage going forward. This also puts society at a disadvantage as such regulations discourage, prevent, and fail to motivate lawyer innovation.

The idea is not new or controversial: multidisciplinary practices, non-lawyer ownership, ABS, and the preservation of a lawyer's professional judgment are not mutually exclusive. Australia, the UK, and Canada have or are moving in this direction without a collapse of lawyer ethics or any apparent greater harm to clients. Regulations can be modernized in a way that permits this evolution while at the same time protecting the public and preserving the integrity of legal services and the profession itself. Some methods might include:

  • Regulating both the lawyer and the law firm or ABS as a whole. This places responsibility for professionalism and ethics not just on a single lawyer, but on the firm or ABS itself. By doing so, law firms or ABS would have significant incentive to ensure proper training, quality assurance, sound accounting and financial management, consistent and improved customer/client service, etc. Non-lawyer investor/owners would not only prefer but demand that law firms and ABS operate in compliance with regulations to avoid fines, sanctions, damage to brand, and other risks to their investments.
  • Requiring law firm and ABS organizational charters, investor disclosures, shareholder agreements, etc., to disclose and obtain agreement that business and legal services decisions will be affected by ethical considerations and therefore some management decisions may not be in the immediate best interests of shareholder financial interests.
  • Requiring majority ownership of law firms by licensed attorneys.
  • Requiring non-lawyers of an ABS to meet a character and fitness test, a financial fitness test, and require certain audited operating standards to be met by the organization as a condition of doing ongoing business as an ABS. (Perhaps the same should be required of lawyers who wish to open law firms.)
  • Requiring certain management and operating decisions to be made by a licensed attorney.

As for expanding the pool of legal service providers to include people without JD's, this will increase access to legal services, but only to a point. In Washington State, our Supreme Court has, sua sponte, created a new law practitioner which has been named a " Limited License Legal Technician." These individuals start as paralegals who enter an online certification program, attend all classes over the internet, rarely if ever meet or speak directly with their instructor (they hear and see the instructor, the instructor does not see them and reads their chat messages/questions as they appear on screen), and they are not graded. At the end of their course, they sit for a LLLT bar exam. The class and certification costs $4,000. Once they pass the LLLT bar exam, they are able to provide legal advice in family law matters and assist people in filling out family law forms. Although there are no LLLTs yet working in this capacity, members of the LLLT Board of the Washington State Bar Association have already requested an expansion of the LLLT's practice scope, which includes representing clients in court and sharing ownership of law firms with attorneys. It is expected that the LLLT program will be expanded to other areas of the law. Is this really a step forward in a broad sense?

Our interaction with law and regulation in society is increasing, not decreasing. The power of government and corporations over our lives becomes more invasive, not less. It is becoming more complex to navigate the law and protect our rights, not easier. This is so much the case that the days of the general practitioner are by and large gone. Attorneys have to specialize or risk bar complaints and malpractice claims. The intelligent response to this reality is not to devise ways to reduce the competency of legal practitioners, but to seek ways to both increase competency and leverage the overly abundant talent and knowledge that exists (legions of unemployed young lawyers, albeit a precipitous decrease in newly enrolled) in more efficient, innovative ways. By liberalizing Rule 5.4 and creating a fertile ground for competition and innovation from within the legal profession, many of these problems begin to take care of themselves…to a certain extent.

The overriding reality is that we are, for the most part, a capitalist society. Private law practice is a for-profit activity. Unless society decides to carve out a legal services entitlement program, people with little or no money will always have great difficulty getting access to legal services of any quality, if at all. LLLTs are no doubt interested in maximizing their earning potential and, like many well-intentioned but poorly designed initiatives to help the poor, the poor remain so and we are left with mostly unintended consequences, which become our new problems to solve.

The focus of the profession should be on ensuring the legal profession can meet the needs of modern society. The needs of modern society require far greater capabilities than a solo LLLT with a shingle and a website can provide. In fact, modern society requires far greater capabilities than what a new law school graduate can provide. While I advocate change, great care must be taken. The motto of Silicon Valley to "fail fast, fail often" is not appropriate in the legal context, as the law is the foundation of our society and its stability and predictably is critical, warts and all.

We as a profession tend to keep our eyes focused on the rear view mirror. It is time we seize the opportunity to look forward, grab a shovel, and have a hand in shaping the future of our profession before the market and the courts do it for us. It is time to modernize the ethics rules, especially 5.4, to allow for non-lawyer ownership and financial interests in law firms, as well as Alternative Business Structures engaged in legal services, which should also be subject to appropriate regulation. The status quo is no longer capable of meeting the contemporary needs of any stakeholder, including lawyers. We must put aside our "fear of Sears" and embrace change with foresight, disciplined intellectual care, and the intent to promote quickened innovation from within the profession itself.


[1] JAMES E. MOLITERNO, THE AMERICAN LEGAL PROFESSION IN CRISIS: RESISTANCE AND RESPONSES TO CHANGE (Oxford University Press) (2013).

[2] Indeed, the requirements to obtain a law degree and pass a bar examination originated at a time when the bar was actively trying to prohibit immigrants from becoming lawyers. Advertising rules, limits on contingency fees, and obscure character and fitness requirements were all intended to limit diversity within the bar at a time when immigration was accelerating. In earlier days, prominent members of the bar all represented corporate clients. They had no need to advertise or resort to contingency fees. But, new lawyers representing low income clients did and they often sued the clients of the bar's elite lawyers, corporations in particular.

[3] This resistance to change, this commitment to preserving the status quo can be seen over and over again within the bar. The bar tried to prevent immigrants, women, and minorities from joining the profession. The bar was hostile to attorneys that dared represent those accused of communist ties under McCarthyism or those that represented civil rights advocates; all in an effort to prevent change. The bar even resisted the advent of legal aid.

[4] JOHN DZIENKOWSKI & RONALD ROTUNDA, LEGAL ETHICS: THE LAWYER'S DESKBOOK ON PROFESSIONAL RESPONSIBILITY 1052 (American Bar Association ed. 2000) (2013).

[5] See AMERICAN BAR ASSOCIATION, A LEGISLATIVE HISTORY: THE DEVELOPMENT OF THE ABA MODEL RULES OF PROFESSIONAL CONDUCT, 1982-2013 611 (2013).

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