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What’s Needed for Solos & Smalls To Innovate? A Legal Ethics Safe Harbor & Crowdsourced Ethics

by Carolyn Elefant on January 24, 2014 · 7 comments

in Ethics Issues, Future Fridays

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Solo and small firm lawyers account for roughly sixty-five percent of all attorneys. Unfortunately, as I’ve written before , solos and smalls are grossly underrepresented in the Reinvent Law space – even though solos and smalls have traditionally been (and in my view, still are) the driving force of innovation in the legal profession.

Still, not all solos and smalls innovate and there’s nothing wrong with that either. Some are simply too busy serving clients; others are too practical to innovate just for the sake of looking cool.  But there’s another far more serious obstacle to solo and small firm innovation that many futurists overlook: ethics regulations which have a chilling effect on solo and small firm lawyers.

It’s no coincidence that many of the innovations in the legal profession – the Axioms or RocketLawyers and matchmaking platforms are non-law firm entities that aren’t subject to ethics rules.  As a result, these companies can push the ethics envelope without fear of serious repercussions. By contrast, if a solo or small firms experiment with a new approach to serving clients, like a virtual office space or a networking arrangement, they can lose their license or reputation if it turns out they made the wrong call (like the Connecticut solos who were prosecuted for ethics violations for participating in Total Attorneys’ lead gen program).

Futurists ignore these very real constraints on solos and smalls. And why not? It’s far more provocative to portray solos and smalls as a bunch of luddites with a guild mentality rather than as responsible business owners reasonably assessing risk in a heavily regulated environment.  And frankly, many futurists — particularly those interested in  access to venture capital — stand to benefit from the ethics hurdles that keep solos and smalls in their place. After all, if ethics rules stymie solos and smalls from competing with new business models, that simply makes it easier for these #altlaw ventures to push solos and smalls right out of the market.

So how can we provide solos and smalls with guidance as well as insulation from punishment making the wrong decision? Two ways: ethics safe harbors and crowdsourcing ethics opinions. Here’s how these would work.

Ethics Safe Harbor

States would create a safe harbor within ethics rules to protect lawyers from disciplinary sanctions if they can demonstrate that they were diligent in researching the ethics rules associated with their action and made a reasonable decision based on their analysis. A call to the ethics hotline would not suffice to trigger the safe harbor; rather, lawyers would need to produce a formal opinion letter from an ethics attorney or submit their own research and analysis of the issues.

Safe harbors are a common approach across sectors to mitigate regulatory uncertainty or encourage adoption of new innovations. For example, without the safe harbor provisions of the Digital Millennium Copyright Act (DCMA), many entrepreneurs may have been deterred from establishing content platforms because of the potential for of liability for users’ copyright infringement.  As companies move from paper to electronic storage of documents, Rule 37(e) of the FRCP  provide a safe harbor from sanction for parties “who fail to provide electronically stored information lost as a result of route, good-faith operation of an electronic information system.” Fifteen years ago, Richard Zorza, a legal innovator in his own right, floated the concept of safe harbors to encourage experimentation and innovation to meet the goals of ethics rules, in his article, Reconceptualizing the Relationship Between Legal Ethics and Technology.

Crowdsourced Ethics

A safe harbor protects solos and smalls who make the wrong choice – but it won’t necessarily advance the state of the law or provide broader guidance. That’s where ethics crowdsourcing comes in.  Right now, most bars lack the resources to offer timely opinions on new developments. So why not crowdsource ethics analysis? The ABA and bar hotlines could maintain a site – like an Ethics Quora – where they would post the ethics questions they receive via the hotline and through the formal opinion process. Lawyers could then select a question to research and analyze in exchange for CLE credit. Lawyers from different jurisdictions could also work together to collaborate on a single analysis instead of having a separate decision issue from each state. Over time, the profession would develop a body of advisory law on ethics that would evolve with new technologic developments while educating lawyers and providing them with real guidance.

Some would argue that the future has no place for the risk-averse and as such, we shouldn’t accommodate lawyers who don’t have the guts to experiment. After all, there are more than enough lawyers willing to defy or simply ignore ethics rules to innovate. But are the unethical lawyers who flout ethics rules the ones who we really want to reward or embrace in the future of law (if the answer is yes, then it’s probably time to pack up and go home)?

Another option is to ignore ethics entirely by opening the door to outside investment in law firms, thereby giving them more latitude to depart from traditional ethics analysis. That’s a common battle cry of the futurist movement too – though I have yet to see anyone address how we protect consumers and the public from the fallout of outside investment gone wrong.  

Still, if we don’t hurry up and innovate ethics, outside investment or surrendering the profession to those who don’t care about ethics are the inevitable result. To its credit, the ABA just completed its Ethics 2020 program designed to revisit existing ethics rules in light of technology changes. But Ethics 2020 merely proposed new regulations; it didn’t develop a new paradigm for legal ethics in disruptive and transformative times.

If we really want innovation to happen while protecting what makes our profession (yup, used the “P” word) special (confidentiality, loyalty to the client, competency and zealous representation, among other things), we need to make legal ethics and compliance more manageable. And if we really want to improve the way that lawyers serve clients, we can’t write off 65 percent of practicing lawyers from the future of law, particularly when they might be open to new ideas if they could hear the downsides as well as the upside and didn’t have to put their law license on the line to enjoy some of the benefits. Ethics safe harbors and crowdsourcing ethics analysis are one way to bring more lawyers on board and more importantly, to preserve what’s best about the legal profession rather than destroy it entirely.

  • Paul Spitz

    Really good suggestions. A third would be a complete revamping of the ethics rules, to bring them from the 19th century into the 21st century. So many of these rules simply make little or no sense anymore, or perpetuate double-standards.

  • Paul Spitz

    Sorry, got a phone call before I could finish. One example of the useless rule that leads to a double standard is the rule (in Ohio, and other states) the prohibits lawyers from using a trade name for their firms. So I have to name my firm something like “Law office of me,” instead of 21st Century Business Law, which is actually more descriptive of what I am doing. Meanwhile, you’ve got a 600-lawyer firm here, and not a single lawyer in the firm has his or her name in the firm name. It’s all dead white men (which is really what the name of the firm should be, Dead White Men PC). So they are essentially using a trade name, where living solos are prohibited.

  • Kelly Twigger

    Carolyn, great topic. I love the crowdsourcing idea, and the safe harbor is a great conversation starter for the topic. In both areas, I see the challenge being that we are so stuck in precedent, that lawyers who provide opinions do so based on what we’ve done in the past, and as you’ve pointed out, there are not often decisions or other opinions to build off of. I’d like to see the idea be that you strive to start providing fodder to create new, more up to date with the issues precedent. I’ve had very recent experiences where judges are unwilling to embrace what’s new about technology that could save time and money, and are instead relying on old case law that is outdated and out of touch.

    The eDiscovery safe harbor provision that you cite has been troubled since the rules came out — what does “good faith routine operation” of IT systems mean — and so it’s effectiveness has been minimal, and they are revisiting it with the latest go-round at the rules. But the point is still taken — that we can start with something — anything — and then work up to a workable solution. What I am finding so hard to work with is the notion that lawyers can’t partner with other businesses to provide better services to their clients that both saves them money and gives them a better product in the end. It pushes lawyers in one of two directions: not being a resource for our clients like they expect, or not being able to charge appropriately for being that resource. While most businesses can benefit from partnership arrangements, our ethical rules make mountains that are tough to climb. More and more attorneys are moving to the consulting space to be able to take advantage of those relationships, and are then leaning towards practicing law without being regulated.

    I would be willing to be a part of a group to work on some solutions if there is one.

  • Kelly Twigger

    I love Dead White Men PC. That’s hysterical. And, oh, so true.

  • Paula Marie Young

    Ethics rules do not reflect the move to web-based marketing or the need to deliver more value to clients through the use of economies of scale via technology. Have the folks on the ethics committees read Susskind’s Tomorrow’s Lawyers yet?

  • Paula Marie Young

    Too true.

  • Mo

    Carolyn

    Right prescription wrong diagnosis. The problems are with the state bars and to a lesser extent, your sacred cow, the ABA.

    The Luddites aren’t among solos and small firms, they are at the state bars. Formal opinion? Timely delivery? Some ethics hotlines won’t even answer and instead take voicemail messages with promised 24-hour responses. And anyway, ethics counsel at most state bars are the great equivocators dancing on the edges of disclaiming knives when it comes to
    doling out ethics advice upon which lawyers can safely rely. And in some states, like California, the ethics hotlines aren’t even staffed by lawyers but by paralegals.

    Crowdsourcing ethics opinions? Sounds good assuming the state bars are willing to voluntarily delegate one of their core functions to decision-making by committee..I can’t even fathom any state bar being that progressive or forward-thinking!
    Not when you have state bars still trapped in the 19th and 20th centuries and hewing to rules like physical office space requirements and old advertising models,

    So don’t hold your breath waiting for them to embrace the future. They are still too busy defending the status quo and the old shopworn practice and teaching models.

    I am also not as worried as you seem to be about outside
    investment models. Risks to consumers? For all the lip service the bars pay to protecting consumers, they are even now doing a substandard job at policing the unauthorized practice of law. See “American Bar Association Standing Committee on Client Protection 2012 Survey of Unlicensed Practice of Law Committees” at
    http://www.americanbar.org/content/dam/aba/administrative/professional_responsibility/2012_upl_report_final.authcheckdam.pdf
    stating, for example, “Twenty-three jurisdictions actively enforce UPL regulations, although some jurisdictions indicate that insufficient funding or resources make enforcement challenging. Nine jurisdictions stated that enforcement is
    inactive or non-existent.

    “Most jurisdictions either do not have a specific annual expenditure for UPL enforcement or were unaware of the exact amount.”

    And in several jurisdictions, they have even exacerbated the potential consumer risk problem by moving to license non-lawyer legal document preparers to ‘practice law’ without
    calling what they do UPL.

    Our best hope is for outside market forces, globalization and constantly emerging new technical modalities to eventually overtake the backward thinkers in the traditional legal establishment and force change upon them.

    - Mo
    “The Irreverent Lawyer” at
    http://lawmrh.wordpress.com/

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