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Non-Lawyer Funding and Ownership…What Say You Solos?

by Carolyn Elefant on April 9, 2012 · 11 comments

in Ethics 20/20, Solo Trends

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Ever since Australia, and now the UK have opened the gates to non-lawyer membership of law firms, the question has been percolating here in the US about whether, and when it can happen here. Currently, the DC Bar, where I practice permits a limited degree of non-lawyer ownership, most likely to accommodate partnerships between law firms and lucrative lobbying practices which are also indispensable to many clients with business in the nation’s capitol. (in my own case, I’ve teamed up with a lobbying firm to serve my clients’ needs). Even so, DC’s rule has always seemed relatively benign, limiting the decisional role of non-lawyers in management and again, implemented for the special purpose of luring quality lobbyists to a practice.

But the non-lawyer ownership that’s currently being discussed – well, that’s a whole different animal. As summarized by Jordan Furlong, we’re talking about publicly funded law firms that are trading in personal injury cases. We’re talking about supermarkets hiring attorneys to man kiosks to dispense legal services to shoppers. We’re talking about law firms raising money to build national brands.

I don’t consider Jay Foonberg much of a futurist – but damn, was he prescient when he advised lawyers to set rates with reference to the cost of a Big Mac. Because where outside ownership of law firms will inevitably lead is to the franchising of legal services. In other words, welcome to the McLaw firm.

But what’s different about the call for open ownership this time around is that it’s supported by several in the legal services community who want to expand access to law. As reported in the Wall Street Journal, folks like Thomas Morgan, a GWU Professor believes that outside ownership will enable social services agencies to offer packages of services, including legal, to their clients.

What troubles me is this: where are the voices of solo and small firm lawyers in the debate? Sorry, but I do not believe that the bar associations – the ABA, or the state bars – speak for me. They are often dominated by large firm interests and they do not have a clue about what we solo and small firm lawyers do and how much we matter .

As a practicing lawyer of 23 years (18 as a solo), I feel trapped with a foot in the past and an eye towards the future. I want to start without a template, if you will but I can’t escape my past or the reality that is the present. The fact that clients who are represented by lawyers do better in court. The fact that selling a law license and letting others call the shots is deceptive and rarely, if ever does any good come of it. But mostly, I am fearful that allowing unfettered outside ownership of law firms will open the gates for these types of ventures that will act as middlemen, selling bargain-basement legal services under a brand name, while hiring paralegals or unemployed lawyers to do the work at $25 a piece. That may be our future – but is it a future we are willing to accept?

On the other hand, the reality is that we’re already heading down that path. Legal Zoom offers assistance and/or unbundled services from lawyers, as does Rocket Lawyer. What is the best way for solo and small firms to compete? Is it to permit lawyers to accept outside investment to run the same ads all over the radio? Or should we allow outside ownership of law firms – and then subjecting them to the same onerous regulation that attorneys must abide – trust accounting, advertising and confidentiality rules – be the way to go? I mean, what if Legal Zoom were subject to the same requirements as lawyers – could they still keep their costs as low?

But most of all, what makes the most sense for solo and small firm lawyers and our clients? The Ethics 2020 show will be in DC April 12 and 13, and I believe that solo and small firm lawyers must attend and speak on our behalf. If you have something to say, please plan to attend – I’ll post the information about the details.

For now, I want to know your views – please post in comments or email me at carolyn.elefant@gmail.com on your views of outside ownership of law firms by non-lawyers. Our future is on the line – shouldn’t we play a part in the outcome?

  • Susan Cartier Liebel

    Carolyn, the group I’m mentoring for Law Without Walls is presenting on this very topic.  There are more than 150 applications at present in the UK to get investors.  It does mean there will be a change in the business model by necessity. Does it mean the death of solos? I’m not so sure about it. It does mean the solo’s business model will have to evolve instead of being a mini-BigLaw as the model is underseige, not necessarily the work product. But if the solo is unaware and can’t change how they do business, then ‘yes’, they will put themselves out of business.

  • Carolyn Elefant

    Well I certainly agree that those solos who are charging thousands of dollars to fill in a couple of forms that a firm can DIY online will be shut down, as they should be. But my concern is more for those who are incorporating efficiencies into their practices – virtual service, “bespoke on a budget” and the like.  Can they compete against national ad campaigns? 
    Thus far, the only examples that I have seen of non-lawyer/lawyer alternative models are the ones that went south – the lawyers who “sold” their licenses in the foreclosure modification matters or debt settlement cases. Or the lawyers who worked for flat fees for banks in foreclosure and automated the process to make it fit within the budget – but made huge errors in the process.  Yes, of course, this happens with individual lawyers too, but on a much smaller scale. 
    This is not just about solo and small firms as a way of life. If solos & small firms didn’t serve a legitimate purpose, then they deserve to go out of business. But everywhere you look, it is solos and small firms who are acting as a check on our justice system – and we need to have that continue. 

  • Susan Cartier Liebel

    See, there is the rub.  It’s not about cutting overhead, it’s about getting INTO the head of the consumer of services and then providing what THEY want. If the argument can be made in conjunction with efficiencies and meeting the client on their terms for service (not compromising of quality) then they will survive.  The reason the Legal Zooms of the world haven’t taken over is because there is a market of consumer who doesn’t want them…a SIGNIFICANT market that doesn’t want them.  It’s up to solos to drive this point home through education.  If this means pooling marketing/advertising dollars, creating marketing/advertising cooperatives to sell this message, they need to do it.  That’s why solos should unite – and quite frankly, ABA dollars should be going towards this cause…there’s a great way to garner members!!!

  • Carolyn Elefant

    That’s exactly why Legal Zoom has made inroads (great TechCrunch piece on the concept of going after undesirable aspects of incumbent market to succeed – http://t.co/9HnnNOdL).  Joint ad campaigns are a great idea too but no idea why that hasn’t taken off. 

  • Jordan Furlong

    Carolyn, I thought it was interesting that when the Legal Services Board granted its first three ABS licenses in England & Wales (http://www.legalfutures.co.uk/latest-news/breaking-news-sra-unveils-its-first-three-abss), one was given to the Co-Operative, a giant banking and grocery chain — but the other two went to small firms:

    ==========

    John Welch and Stammers is a long-standing generalist law firm in
    Witney, Oxfordshire with seven fee-earners and 11 support staff. It has
    been licensed to conduct all the reserved legal activities except for
    notarial work.

    The SRA said ABS status will enable the firm to continue and develop,
    as one solicitor partner retired last December, leaving two solicitor
    partners and non-lawyer Bernadette Summers, who has been practice
    manager for the past 12 years and will become managing partner.

    Kerry Joels, of John Welch and Stammers, said: “We have for a number
    of years wanted to introduce Berni Summers into the partnership as
    recognition of her major contribution to the development and running of
    our firm and are delighted that by becoming an ABS we can achieve this.”

    Lawbridge Solicitors Ltd, based in Sidcup, Kent, is an existing solo
    practice run by Michael Pope and handling employment work, litigation
    and commercial/corporate legal services. It too has been licensed to
    undertake all reserved activities except notarial work.

    His wife, Alison, currently the practice manager, will become a director of the firm “with a significant shareholding”.

    In a joint statement, they said: “We are very pleased to be one of
    the first firms to be authorised as an ABS. It was always our intention
    to take advantage of ABS as a means of allowing joint ownership of the
    firm, and to use this as a platform to raise our profile and move
    forward to expand the firm.”

    ==========

    Now, to be frank, I suspect that these choices were driven by optics as much as anything else — the LSB is anxious to ward off the idea that ABSs will lead to the full-scale Wal-Martization of the legal market. But I do think these examples present legitimate variations on the “non-lawyer ownership” theme — bringing experienced staff who happen not to be lawyers into the firm’s equity circle. Another variation, of course, will be associated professionals such as doctors, Realtors, financial planners and others whose practices complement the solo’s own areas of focus — MDPs by another name. I can see these and similar sorts of arrangements making good sense for small law firms in the right circumstances.

    Here’s the thing: “ownership” doesn’t need to be synonymous with “control” — 100% ownership, sure; less than 50%, no. Nor is “non-lawyer” automatically synonymous with “anti-lawyer” — we needn’t assume that people or organizations who aren’t lawyers will be inherently hostile to the ethical and procedural standards of the profession. (Smart investors in a legal enterprise would recognize that damaging the firm’s professional reputation would only reduce the value of their investment).

    Of course we need to be careful to “let the right ones in,” but we first have to recognize that there can be such things as the right ones. We need to develop a clearer understanding of the “non-lawyers” who want to be part of this market, and to learn to distinguish the opportunists and exploiters from the allies and fellow travellers. Once we do that, I think, we can start making progress towards both principled opposition and principled accommodation to this trend.

  • Susan Cartier Liebel

    Actually, the 150 pending applications in the UK are for firms of less than 20 lawyers, Jordan

  • http://twitter.com/BruceGodfrey Bruce Godfrey

    J’oppose.  What maintains ethical standards, to the extent that standards are maintained, is that the law licenses are limited and revocable, not mere fungible, negotiable assets like a cab license.  If attorneys cannot be disbarred or suspended effectively, no standards will survive and if Big Capital not only uses law firms but owns them, they will make the least ethical online marketing hacks look like Socrates.  

    It will wipe the profession out and legal services will be delivered with the same ethics by which suits are sold – “no sir, the suit doesn’t make your rear end look fat.”  We need attorney discipline to make lawyers tell the truth: “no sir, the suit doesn’t make your rear end look fat; the rear end is simply broad and the suit is an innocent bystander.”  No way will Best Buy or Wal-Mart deliver services with that level of integrity; we barely do it ourselves now.

  • myshingle

    I guess what also makes me wonder is the purpose of all of this. To the extent that lawyers believe that access to funding would help expand meaningful legal services, that is not such a bad thing. Certainly, I would not have a problem eliminating some of the fee split rules – I don’t want to see the return of runners, and I’m not a fan of pay per lead – but the alternative is having large firms like Sokolove or others set up affiliates in every state and buy up SEO and dispense the cases.

    On the other hand, I am concerned about the prospect of using outside ownership to circumvent existing ethics rules on conflicts, confidentiality and trust accounts. I mean, when I hear the ads that Legal Zoom puts on the radio — how much they save, how customers will be given “expert” legal advice — and then see how lawyers can’t even state a “specialty” on LinkedIn – that certainly puts lawyers at a competitive disadvantage. And again – and sorry to harp on this – but sadly, we have seen the downside of these hybrid lawyer/non-lawyer entities – the debt settlement companies, the foreclosure, “save your house scams” and the robo-signers. I mean, this kind of low-rent, widespread legal services basically brought our economy down – it is beyond just hurting consumers. Perhaps ABS is like legalized pot or prostitution – an evil, perhaps, but one that if regulated can be subject to check.

    The final note – I do believe that lawyers are perceived differently in other countries. Our adversarial process, constitutional rights to cross
    examination and against self-incrimination really place lawyers in the role
    of guardian and defender. Perhaps their role in other countries is not as
    primary, and thus, consumers did not have as much to lose. Anyway, thanks
    Jordan & Susan for the interesting discussion. Next month, I will be in
    the UK myself and hope to continue this dialogue with others.

  • NYC Lawyer

    The New York State Bar Association actually sought commentary on this issue rather recently. It seems it is gaining momentum within the upper echelon of the ABA. On the one hand, it would be great to solicit money from Uncle Joey or sister Ann to get a practice up and running or perhaps  add a much needed infusion of cash into the marketing budget, but I assume this is not what folks are dreaming of when they weigh this issue. It is ripe with conflict. If 75 people are shareholders in my firm then I think my loyalties might conflict between the need to get them returns and the need to do the right thing for my client(s). My hunch is Biglaw is seeking for alternative profit models as the old way of doing business erodes and profit margins subside. Remember Marc Drier? What is to prevent the profileration of legal ponzi schemes let alone fly by night McLaw start-up firms? The profession as we know it is in a spiral and has lost a lot of its luster in the last 30 years. We should be thinking of ways to enhance it; not subtract from the dignity of it. Leave it to legal scholars who know nothing whatsoever about running a small law practice to be the definitive voice. If you want to provide more legal services to the poor than have the Government implement a legal insurance program like Medicaid and Medicare where starving lawyers with no jobs can accept reduced fees, develop a skillset, and grow a business while filling the void of legal services left to the underserved and aging population.

  • Nevis Lawyer

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  • http://www.personalinjurylawfirm.com/ Miami Personal Injury Lawyer

    Solo personal injury lawyers could definitely use all the funding help they can get. Good post.

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