Today's Wall Street Journal features an article on the ABA's debate over nonlawyer investment in law firms. While the ABA is debating whether to allow minority-share investment by investors who take an active role in a law practice, Responsive Law is trying to push this debate away from these marginal changes to transformative changes that would allow law firms to raise sufficient capital for true innovation that would benefit consumers through lower prices, wider consumer options, and better service delivery. (See this post for our testimony to the ABA on this issue.)
The article quotes Responsive Law's Tom Gordon on the potential consumer benefit from models like those in Great Britain, where outside investment is allowed, and businesses that had not previously offered legal services are now poised to do so: "It's the people who can't pay $500 an hour but could pay a $500 flat fee for a divorce who would benefit."
The ABA's Ethics 20/20 Commission has released its preliminary recommendations on alternative business structures for legal practices. Regrettably, as they promised in their earlier issue paper on this topic, they have not considered meaningful reforms such as allowing outside investment, which would allow innovation in the delivery of legal services that could benefit consumers. Instead, they have recommended merely a modified version of the District of Columbia's existing rule on this issue.
The panel's recommendation would only allow minority investment from other professionals who take an active role in a law practice. The proposal does not even allow true multidisciplinary practice, where lawyers and other professionals work side-by-side to serve customers with a range of legal and non-legal needs.
http://responsivelaw.org/index.php/news/blog/item/86-new-book-first-thing-we-do-let-s-deregulate-all-the-lawyersYesterday's New York Times features an op-ed by Clifford Winston, an economist and senior fellow at the Brookings Institution, and co-author of First Thing We Do, Let's Deregulate All the Lawyers. Winston focuses on reducing barriers to entry for those who wish to provide legal services, including the elimination of legal licensing and allowing non-lawyers to invest in law firms. These changes, Winston argues, would promote innovation and lower the price of legal services. We commented on these proposals in an earlier post.
Winston is absolutely right: Licensing laws must be adjusted to allow greater competition in the provision of legal services across the spectrum of legal needs and ability to pay. Responsive Law has commented at length to the American Bar Association about the need to promote innovation by allowing outside investment in law firms. Consumers are not well-served by the current one-size-fits-all system that assumes that every legal need must be met by someone who has attended law school, passed the bar exam, and practices law in a solo practice or partnership.
In the 1990's, Canon aired a series of commercials for its Rebel line of cameras featuring Andre Agassi. The implication was that Agassi was a rebel since he had (at the time) long hair and occasionally wore a splash of color on traditionally white tennis apparel. After viewing these commercials, I coined the term "tennis rebel" to describe someone who is completely mainstream, but who is deemed a rebel for ever-so-slightly pushing the boundaries of a staid subculture.
The American Bar Association's annual list of Legal Rebels perfectly fits the tennis rebel definition. This year's list focuses on large law firms. The acts of "rebellion" include asking legal hypotheticals in hiring interviews, engineering a law firm merger and expansion, creating a wiki to guide paralegals' work, and sending lawyers to Harvard for training. There are also "rebels" whose acts of rebellion are non-specific, but seem to involve social media and the use of technology.
To be sure, all of those are worthy accomplishments. But, of this year's crop of rebels, only two are doing anything that matter to the average person. Paul Sweeney, of Foley Hoag, has marketed his firm's services on the online deal site LevelUp. The firm offered a $250 incorporation package to startup businesses, which qualified buyers for additional discounted services from the firm. The other true rebel, David Perla, founded Pangea3, a business that facilitates outsourcing of legal services to India. Perla's project would have been impossible to implement through a law firm because it relied on venture capital and the legal industry's rules prohibit firms from having outside investors. Now, if a lawyer were to work to challenge those rules, that lawyer would be a true legal rebel.
We recently commented on the ABA's Ethics 20/20 Issue Paper on Alternative Businesss Structures which examines, for example, whether lawyers should be allowed to partner with nonlawyers or to raise money from investors. You can read them here.
A member of the North Carolina Senate has introduced a bill that would promote the delivery of innovative legal services. Senate Bill 254 would allow non-lawyers to own a minority stake in law firms. As we mentioned in our previous post, outside investment in law firms could provide them the capital they need to innovate and find ways to serve consumers better. Some lawyers have claimed that non-lawyer ownership could compromise their ethical duties to their clients or to the courts. However, the bill would protect consumers by warning non-lawyer owners that duties between shareholders do not trump duties to clients. If passed, the bill would be a first step toward helping the legal profession join the rest of the economy in providing integrated and innovative services. We urge the North Carolina legislature to pass SB 254 and encourage other states to introduce similar legislation.
A recent New York Times article describes advances that allow computers do much of the work lawyers do in complex litigation where there are millions of documents and emails that need to be reviewed before trial. But computers can also help simplify everyday legal matters such as wills, divorces, and bankruptcies.
Information gathering is good example of a task that computers do well. In corporate litigation, sophisticated software applications relieve lawyers of having to spend many tedious hours sifting through e-mails. Similarly, legal software for consumers can flawlessly execute a checklist of questions designed to gather the right information and then complete forms that many people would have made mistakes on their own.
In both cases software allows lawyers to focus on what they do best: legal analysis and strategic planning. In the corporate scenario, more of the client’s money goes toward these higher-end functions because the computer gathers information not junior associates who bill hundreds of dollars an hour. In the consumer scenario, software can enable a person to draft their own document rather than paying a lawyer or paralegal to do the same task. The resulting savings can then be put toward hiring a lawyer to review their document. It is worth noting that because many people cannot hire a lawyer at all, the alternative to software-assisted legal drafting is having no assistance at all.
In the 1999 case Unauthorized Practice of Law Committee v. Parsons Technology, a federal court held that Quicken Family Lawyer software was acting as a “cyber-lawyer” and therefore violated the state’s Unauthorized Practice of Law statute. The Texas legislature quickly passed a bill amending the statute. We hope that, as legal software becomes more sophisticated, the legal profession will continue to recognize the valuable role computers can play in increasing consumers’ access to justice.
The New York Times recently noted the trend toward third-party litigation investment, where investors provide money to litigants in exchange for a share of potential judgment award. Blogger Jordan Furlong decried the practice, saying it “bump[s] up against the basic principles of the justice system” and is “a grave embarrassment to the legal profession.” While his point that third-party litigation funding serves as evidence of the prohibitively high costs of litigation is valid, it is difficult to look past anything that might help consumers gain access to the legal system.
Furlong correctly observes that the legal process is “labyrinthine, process-drenched, and time-devouring,” resulting in costs that place legal access beyond the reach of “what 80% of the population can afford. Few would argue. The legal system is exceptionally complex, often unnecessarily so, but we can’t afford to wait for the legal system to untangle its own bramble bush.
The cost of access to the justice system is high in large part because only lawyers are permitted to offer legal services. Lawyers don’t want to charge less to perform routine tasks, but neither are they willing to allow other professionals to perform them. Allowing non-lawyer practitioners to draft wills or review simple contracts, allowing lawyers to offer services online through a virtual practice, and expanding the role of small claims court all would give consumers access to a wide array of low-cost alternatives to traditional and expensive legal services.