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If We Change Rules to Allow Non-Lawyers to Own Law Firms, How About Changing Them to Let Lawyers Compete?

by Carolyn Elefant on August 22, 2014 · 3 comments

in Future Fridays

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Last week, Jordan Furlong lavished praise on the Canada Bar Association’s new report, Futures: Transforming the Delivery of Legal Services in Canada. As you might expect, the Report reads like a legal futurist’s wish list, supporting initiatives like non-lawyer ownership of law firms and fee-splitting between lawyers and non-lawyers. Still, truth be told, Jordan’s kudos for the CBA Report aren’t undeserved.

What’s heartening about the report from a traditionalists’ perspective like mine is that the CBA Report also keeps clients in mind. Thus, the Report recommends regulatory oversight of alternative business structures (ABS), the loose term for non-lawyer owned legal service providers which include (a) lawyer supervision of non-lawyer delivery of legal services,(b) a requirement that ABS purchase legal malpractice insurance and (c) a prohibition on access to privileged client information by ABS owners without express client consent.  Lawyers are already subject to these requirements, so extending them to ABS will ensure that clients have a level of tangible protection beyond “market forces” (such as e-shaming an ABS that does a client wrong). Further, subjecting ABS to these types of obligations avoids a dual standard in oversight of ABS and lawyers which can’t be justified, given that both serve clients.

The CBA’s proposed regulatory framework certainly makes the ABS concept more palatable – and therefore, more likely to gain traction in the United States. But here’s what I don’t get:  why are legal futurists and #newlaw advocates so willing to bend over backwards to accommodate non-lawyer innovation while turning a blind eye to the regulatory barriers that keep lawyers, particularly solos and smalls from competing and innovating? 

Over the past few years, I’ve repeatedly covered the topic of how current bar rules block lawyers from innovating. But because my focus is on helping lawyers rather than entrepreneurs improve the quality and efficiency of service to clients, I might as well be yelling into a cone of silence.  Still, the problems that I’ve identified hold lawyers back. These include everything from lack of clarity on ethics rules and a safe harbor from the bar for firms that push the envelope in good faith but still cross ethics lines — has a chilling effect on solos who want to innovate. So too do rules on trust accounts (that make it overly complex for lawyers to accept credit cards like online non-lawyer providers) and bias towards billable hour pricing.

The CBA proposal would allow lawyers to share referral fees without non-lawyers – but what about letting lawyers share referral fees between lawyers without jumping through all kinds of legal hoops? And many jurisdictions won’t even allow law firms to use trade names, which can make them look fly-by-night when competing with the established brand name of an ABS. Even the ABA has betrayed its own – it will go and partner with RocketLawyer to expand access to legal services, but it won’t even put the Model Code of Professional Responsibility in the public domain so that lawyers can figure out what we can do on our own to expand the scope of services without running afoul of ethics rules.

I don’t necessarily harbor philosophical or guild-mentality-induced objections to regulated ABS structures. Certainly, there will be unscrupulous ABS owners but let’s face it, there are plenty of unscrupulous lawyers as well. And sadly enough, some of the most egregious practices that we fear will arise from non-lawyer fee-splitting – like the odious practice of hospital room runners who drum up business for PI lawyers – originated by lawyers, not clients. That’s not to say that non-lawyer bean counters, like the corporate interests that make decisions about health insurance, will always act in the best interest of clients – but sadly, lawyers don’t always do so either.

But my objection to ABS isn’t necessarily that non-lawyers won’t have clients’ interests at heart (though I do fear for what may happen at the margins if we lose independent lawyers). Rather, my position is this: What’s good for #newlaw ought to be good for #oldlaw. And if we’re willing to change the rules to allow non-lawyer owned entities to participate in the legal market, then shouldn’t we change the rules to make sure that lawyers can compete with them?

  • Sandy

    Excellent post! The longer I practice the more I wonder whether the burdensome restrictions on practicing law are really worth it. I would argue that increased complexity leads to increased cost – which is passed onto clients and makes us unable to compete for clients with non lawyer entities.

  • Paul Spitz

    Three changes I would like to see to help lawyers:

    1. Lift the ban on trade names! If a 300-person firm can be named after dead white guys, why can’t I adopt a trade name for my firm? Either make the rules consistent or abolish them.

    2. Allow lawyers to pay referral fees to other lawyers. I’m not talking about splitting fees proportionally when two lawyers work on one project. I’m talking about me being able to send a bottle of champagne or a percent of my take on a corporate project referred to me by an attorney who practices criminal law. It may be only once every two years I can make a reciprocal criminal referral back, so being able to reward the referral immediately facilitates lawyers referring projects out to people who have the expertise, rather than trying to be jack-of-all-trades. Can you really practice estate planning, corporate law, real estate, civil litigation, employment law, criminal law, AND personal injury law, and do it all really well? Or do any of it passably well?

    3. Lift the ban on solicitation of clients. OK, I understand why there is a prohibition on the attorney standing in the ER and tucking her card into a patient’s hand while the doctors are performing CPR on the patient, but that is a world apart from my practice as a business lawyer. My potential clients aren’t vulnerable or suffering from diminished capacity. They can take care of themselves. If I pay $500 to the Chamber of Commerce, why can’t I get a mailing list from the Chamber and send out fliers to my fellow members? Every non-lawyer in the Chamber can.

    I’m surprised the ABA and the state bar associations don’t make us wear robes and wigs, brush out our mutton chops daily, and dip snuff from small brass cases, while riding around in horse-drawn buggies to get to and from work.

  • Cheryl

    Here’s a change for you! Ban the term “non-lawyers” forevermore. Do we ever see the terms non-doctor, non-librarian, non-dentist, etc.? No, because all of those jobs and professions have their own titles such as nurse, library clerk, dental hygienist etc. Well, so do those who work in the legal industry. Their titles are paralegal, law librarian, legal assistant, CFO, CIO, COO, etc.!

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