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,
 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,
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
 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.
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.
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,
 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
- 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.
 JAMES E. MOLITERNO, THE AMERICAN LEGAL PROFESSION IN CRISIS: RESISTANCE
AND RESPONSES TO CHANGE (Oxford University Press) (2013).
 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.
 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
 JOHN DZIENKOWSKI & RONALD ROTUNDA, LEGAL ETHICS: THE LAWYER'S
DESKBOOK ON PROFESSIONAL RESPONSIBILITY 1052 (American Bar Association
ed. 2000) (2013).
See AMERICAN BAR ASSOCIATION, A LEGISLATIVE HISTORY: THE DEVELOPMENT OF THE
ABA MODEL RULES OF PROFESSIONAL CONDUCT, 1982-2013 611 (2013).