In the face of opposition from Responsive Law, the Virginia State Bar (VSB) has backed off from a proposed ethics opinion that would have restricted Virginians’ ability to use affordable fixed-fee legal services.
The proposed opinion would have declared that lawyers were acting unethically by participating in programs where a company advertises their services for discrete tasks—such as creating a will, reviewing a lease, or filing for an uncontested divorce—and charges a fixed flat fee for those services. The opinion was clearly directed at Avvo Legal Services, which has begun to roll out such services in markets nationwide.
In the proposed opinion, the VSB’s Standing Committee on Legal Ethics opined that lawyers could be violating legal ethics rules by paying a marketing fee to a company like Avvo, which it considered a violation of the prohibition on lawyers sharing fees with non-lawyers. It also said that it would be unethical for Avvo to maintain possession of client fees while a client waits for the lawyer to complete the work for which they were hired. Instead, the committee claimed, such money should be held in the lawyer’s client trust account.
Responsive Law submitted comments to the committee opposing the proposed opinion. We noted that clients were likely to be better protected against misappropriation of their fees under Avvo’s model than by a client trust fund. A client trust account, we noted, “is not a subterranean vault guarded by a goblin at Gringotts Wizarding Bank; it’s a paper (or electronic) construct to which the lawyer has complete access.” By contrast, under Avvo’s model, it holds the fees until the client indicates that the lawyer has satisfactorily completed the work.
Our comments also noted that a lawyer’s payment of a marketing fee to Avvo is a reasonable business expense, much like a credit card processing fee, and is also a totally reasonable way for lawyers to advertise that causes no harm to consumers. Rather than looking for technical violations of the ethics rules, the VSB should consider whether the increased access to legal services such services provide outweighs a theoretical harm that has not been demonstrated.
Finally, we pointed out that attempts by the VSB to restrict innovative new business models is a potential violation of the U.S. Supreme Court’s recent ruling in North Carolina State Board of Dental Examiners v. Federal Trade Commission. In that case, the Court held that self-regulating professions cannot hide behind “state action” immunity from antitrust law when the regulators are market participants. Several elements of the proposed opinion relied upon bar rules that are anticompetitive, making antitrust liability a strong possibility for the VSB, the Ethics Committee, and their individual members.
Aside from Avvo and one individual lawyer, Responsive Law was the only entity to submit comments opposing the proposed ethics opinion. In response to those comments, the Ethics Committee voted not to submit the proposed opinion to the Bar Council. VSB Ethics Counsel James McCauley told Virginia Lawyers Weekly (sub. req’d) that the committee now plans to “go back and study the affected rules.”
To read Responsive Law’s comments to the VSB, click here.
The American Bar Association’s Commission on the Future of Legal Services has just released its final report and recommendations. Responsive Law will have a lot to say about this report over the coming weeks and months, but we’d like to make a few important points upon its release.
Responsive Law testified to the Commission numerous times. The Commission, which had among its membership a number of legitimate advocates for a more open, innovative, and accessible legal system. We had great hopes that it would issue recommendations that would make legal help available to the millions of Americans who cannot afford a lawyer.
The first part of the Commission’s report, in which it outlined its findings, lived up to this promise. Unfortunately, the second part of the report, consisting of the Commission’s recommendations, was a disappointment in which the Commission let down the millions of Americans whose problems it had so thoroughly described.
The Commission’s findings run several pages. Among them are the following, perhaps most relevant to a more accessible legal system:
“Most people living in poverty, and the majority of moderate-income individuals, do not receive the legal help they need.“
“The public often does not obtain effective assistance with legal problems, either because of insufficient financial resources or a lack of knowledge about when legal problems exist that require resolution through legal representation.”
“New providers of legal services are proliferating and creating additional choices for consumers and lawyers.”
“Many lawyers, especially recent law graduates, are unemployed or underemployed despite the significant unmet need for legal services.”
“The traditional law practice business model constrains innovations that would provide greater access to, and enhance the delivery of, legal services.”
“The legal profession’s resistance to change hinders additional innovations.”
To summarize, the Commission identified the following premises:
1) People aren’t getting legal help and don’t know where to find it.
2) There are many innovative legal service providers—both lawyers and non-lawyers—who would be able to help the public if they weren’t constrained by traditional business models and the legal profession’s resistance to change.
The obvious conclusion from these premises is that the ABA should act to remove the barriers that prevent innovative service providers from helping the public. However, the Commission failed to do so.
Where the commission could have made strong recommendation that the ABA remove regulatory barriers, it instead bowed to bar pressure and made a series of milquetoast pronouncements urging further study and consideration.
Rather than saying, “Lawyer-regulators, tear down these walls!” the Commission has engaged in a policy of appeasement toward the ABA, leaving consumers to face the profession’s continued indifference toward their exclusion from the legal system.
The Commission Calls For Further Study of the Issues It Has Spent Two Years Studying
The Commission’s overarching recommendation regarding regulation is that “Courts should consider regulatory innovations in the area of legal services delivery.” After spending two years considering regulatory innovations itself, the Commission needed to do better than telling courts to merely consider them.
The Commission is just as passive in how it addresses specific areas of regulation. Recommendation 2.1 states “Courts should consider adopting the ABA Model Regulatory Objectives for the Provision of Legal Services.”
Here the Commission encourages multiple layers of bureaucracy between its recommendation and any actual regulatory change. The Model Regulatory Objectives, while important, are not themselves new regulations, but merely a framework to use when adopting regulations. And the Commission doesn’t even recommend that courts adopt the Model Regulatory Objectives, only that they consider doing so!
The next recommendation from the Commission is equally obsequious. Recommendation 2.2 states: “Courts should examine, and if they deem appropriate and beneficial to providing greater access to competent legal services, adopt rules and procedures for judicially-authorized-and-regulated legal services providers.”
Putting aside whether non-lawyer legal service providers (LSPs) should be regulated by the courts, this recommendation asks the courts only to examine such regulation, not necessarily to adopt it. In fact, the Commission makes clear that (after two years of study) it “does not endorse the authorization of LSPs in any particular situation or any particular category of these LSPs.”
The Commission is at its most timid in addressing alternative business structures (ABS), which would allow non-lawyer ownership and investment in law firms. As we’ve emphasized in comments to the Committee and elsewhere, ABS could foster the creation of mass consumer law firms, which could provide consumers with access to an affordable lawyer for everyday legal matters such as family law, wills, housing, and employment, in the same way that H&R Block provides affordable tax help.
The Commission’s Recommendation 2.4 reads, “Continued exploration of alternative business structures (ABS) will be useful, and where ABS is allowed, evidence and data regarding the risks and benefits associated with these entities should be developed and assessed.”
The Commission notes that it “undertook a robust examination” of ABS. It released an Issues Paper on the subject, which included reference to eight major studies of actual and prospective ABS models published in the last two years. The Issues Paper generated comments from 33 organizations and dozens of individuals. Yet, after all of this, the Commission can only conclude that “continued exploration…will be useful”!
The Commission has already undertaken this useful exploration, and the evidence it has gathered weighed heavily in favor of allowing ABS. Furthermore, recommending repeal of the ABA position against ABS would not have mandated that any state allow ABS, let alone that any firm become one. Unfortunately, though, the Commission was unable to take even that small step.
Giving credit where it is due, the Commission did actually make a wise recommendation with regard to regulation of online service providers. Recommendation 2.3 urges states to use caution in regulating these new service providers, lest they stifle innovation that is bringing legal access to millions of Americans. This is a situation where the generally applicable consumer fraud laws provide adequate protection to the public, and additional regulation could stifle an industry that is just beginning to realize its potential in bridging the access to justice gap.
In most cases, though, the extreme caution exercised by the Commission is not indicative of considered restraint, but of deference to the prevailing wishes of the most hidebound parts of the bar, as embodied by the ABA. What makes this particularly disappointing is that the Commission has many members who are passionate about innovation in the delivery of legal services and who realize the necessity of moving away from the status quo if legal services are ever to be within reach of the average American. In fact, the Commission’s finding of fact make this point exceptionally well.
Why Was The Commission So Deferential To The Bar’s Status Quo?
Why, then, did the Commission act so timidly in failing to make what it had to know were the logical policy recommendations based on its findings? I have no inside knowledge of the Commission’s thoughts or processes, but I have a couple of theories to share.
One possibility is that the Commission, fully aware of the difficulty that any reform proposal faces from the ABA House of Delegates, decided that it would be more prudent to push for incremental reform. Every reform movement has to make the decision between the ideal and the possible. However, if the Commission purposely decided to advocate only incremental reform, then it wasted an opportunity.
The Commission’s recommendations are not legislative proposals to be voted up or down, but the results of the collective wisdom of two years of study. It’s not important in this case whether the recommendations would be approved; it’s important that they solve the problems the Commission was charged with studying. Rather than pulling its punches, the Commission could have played a role as the ABA’s conscience by reminding it of the real access to justice concerns that the bar has created by supporting lawyer-focused, rather than consumer-focused, regulation.
A second possibility is that the Commission was unduly influenced by the lawyer establishment. I don’t mean to suggest any sort of corruption, but rather that the overwhelming majority of voices that the Commission heard were from lawyers and bar groups. Of the hundreds of comments received by the Commission, nearly all were from ABA entities, state courts, state bar associations, lawyers, and businesses providing legal services. At the Commission’s invitation-only National Summit on Innovation in Legal Services, Responsive Law was the only consumer group in attendance. And, the members of the Commission, while often dedicated to reforming the legal system and increasing access to legal services, are all lawyers themselves.
In its findings of fact, the Commission noted,
“The legal profession continues to resist change, not only to the public’s detriment but also its own. During the Commission’s public hearings and the ABA House of Delegates floor debate on Model Regulatory Objectives for the Provision of Legal Services, as well as breakout sessions at the National Summit on Innovation in Legal Services and grassroots legal futures meetings across the country, the Commission repeatedly heard similar remarks about the profession’s delayed adoption of, if not outright resistance to, innovations in technology, systems process improvement, and other developments that could benefit consumers of legal service but would affect traditional ways of delivering legal services.”
It is unfortunate that the Commission may have succumbed to the same resistance to change that it lamented in the rest of the profession. However, such a result may have been inevitable. After all, when a Commission publicizes its activity through the ABA website, holds its hearings at ABA meetings, and gives over 70 presentations with nearly all taking place at bench or bar meetings, it’s not surprising that the process will be dominated by lawyers. Given the predominance of lawyers in this process, it’s a credit to the Commission that its findings of fact were not slanted toward the bar’s status quo.
A Clear Sign That Lawyer Self-Regulation Cannot Work
If this second theory about undue influence is correct, then it provides strong support for Responsive Law’s position (as recently articulated in our testimony to the California Task Force on Governance in the Public Interest and the California Assembly) that ultimate regulatory oversight of the legal profession needs to be vested in a publicly responsive body that does not consist predominantly of members of the profession. In making the rules governing the legal profession, state bars and supreme courts follow much the same process as the Commission did, only on a smaller scale. They issue proposals for public comment that appear where only lawyers are likely to see them, and then hold hearings where they hear only from lawyers about how lawyers should be regulated.
If a commission consisting largely of people sympathetic to the access to justice problems faced by people in this country spent two years studying those problems only to issue recommendations consisting largely of platitudes, aspirations, and calls for further study, then there’s no chance that bar associations or state supreme courts, no matter how noble their motives, can fairly assess regulation of the their own profession. Regulation of the lawyers, by the lawyers, inevitably becomes regulation for the lawyers. The American public, whose interests the bar claims to be protecting, deserves better.
Ilene Seidman of Suffolk University Law School recently wrote a column about a paradox of supply and demand in the legal field: lots of people who can’t afford legal help and lots of recent law grads working as baristas. Her column highlights the benefits of law-school based incubator programs teaching law students about the business end of law so that they can use technology to be on the cutting end of practice upon graduation. Suffolk University’s program teaches “innovative approaches” to students them to start their own firms or join small firms serving average-income people by teaching new technologies, marketing skills, process management and business through cross-training.
These incubators provide valuable opportunities for law students interested in opening their own firms, and are able to make some difference in bridging the access to justice gap. However, a more successful approach to closing the justice gap is to allow outside investment in law firms. Training law students as managers, business owners, and entrepreneurs, can be valuable, but allowing corporate-run law firms would allow people who have studied business disciplines to take on those roles and let the law students do what they went to law school for: serving clients through the practice of law. If lawyers are taking on the management side of the firm as well as working with clients, their skills are spread thin and they are unable to help as many consumers as they would be able to if they focused strictly on providing legal services. Outside investment would allow firms to offer law on a consumer scale that small and solo law firms are unable to offer.
Legal startups have been slow to develop because of the requirement that capital for innovation come only from lawyers. Allowing outside investment would allow a new model of legal services to arise: the mass-market consumer law-firm, which could allow millions of Americans to affordably and accessibly navigate the legal system. Mass-market consumer law would also help provide recent law school grads with training, employment, and opportunities for internal advancement. Startups bring innovation to markets. However, due to restrictions on non-lawyer investment, legal service startups that employ lawyers to provide services to the public cannot seek the investor funding that allows innovation in other fields to flourish. For these startups, it’s not enough to have a business model that could reshape the legal industry—they must also contort their financial structure to avoid non-lawyer investment and fee sharing.
If lawyers want to run a small firm, we should, of course, make that option available to them, and incubators do a wonderful job of enabling them to do so. However mass-market consumer law firms would do a far better job of making lawyers available to the masses, and they can only exist if outside investment is allowed.
Responsive Law has just released its Report Card on Barriers to Affordable Legal Help. The report card grades all 50 states and the District of Columbia on how their regulations regarding the practice of law restrict consumer access to the legal system. Unfortunately, the news is not good, with no state receiving a grade higher than a C.
The report card graded three areas:
- barriers to affordable help from lawyers (45% of total grade),
- barriers to affordable help from non-lawyers (40%), and
- support for self-represented litigants (15%).
Barriers to Affordable Lawyer Help
The first area the report card graded was Barriers to Affordable Lawyer Help.
Non-Lawyer Ownership of Law Firms
Most of this grade was determined by whether the state allows non-lawyer ownership. Non-lawyer ownership of law practices would allow innovation and economies of scale that don't exist in the current law firm model. Nearly all consumer law firms—those that offer services in areas such as estate planning, family law, housing, employment, and consumer disputes—consist of fewer than ten lawyers. At this scale, legal services are still very individualized. Furthermore, lawyers in such a small firm have to spend much of their time on marketing and management, rather than on the practice of law.
Allowing non-lawyer ownership would permit the creation of mass-market consumer law firms that could use their scale to mechanize much of the most common legal work. They could also keep lawyers out of both rote legal matters and management and marketing, reserving their high-cost labor for legal oversight and review and for thornier legal questions. All of this would significantly reduce the price of a lawyer.
Unfortunately, with only a couple of very minor exceptions, non-lawyers are not allowed to have an ownership interest in a law firm in the U.S. On the other hand, in England and Australia, non-lawyer ownership is permitted and regulated to protect consumers from any potentially adverse impact on clients. As a result, people in those countries have access to a wider range of reasonably-priced consumer legal services, on Main Street or in the mall.
Other Regulations Affecting Affordable Lawyer Help
The other areas making up the Barriers to Affordable Lawyer Help grade were what type of advertising restrictions are placed on lawyers, whether consumers can hire lawyers from other states, and whether consumers are allowed to use "unbundled" legal services (hiring a lawyer for just part of their legal matter).
Restrictions on lawyer advertising often leave consumers with limited ways to find out about lawyer services. In a Yelp economy, they leave consumers stuck with an archaic model where the bar's recommended way to find a lawyer was to ask for a referral from a friend at the country club.
Restrictions on multijurisdictional practice unnecessarily restrict consumers' options based on an outdated notion that being admitted to the bar in a state has a high correlation with knowledge of that state's law. In a national economy where much of the law is identical from state to state—and where lawyers' skill is as much in finding the law as in knowing it off the top of their heads—it's irrational to prevent a Tennessee lawyer from handling a legal matter in New Jersey, particularly if the Tennessee lawyer is an expert in the particular area of law at issue. Canada has taken a much more progressive approach to multijurisdictional practice by adopting a National Mobility Compact, which allows a lawyer admitted to practice in one province to practice fairly easily in another province.
One area that most states do fairly well in is in allowing limited scope, or "unbundled" legal services. For example, in most states, a person can prepare their own documents for a court appearance while hiring a lawyer just to represent them in court. Our report card analyzed whether states provided enough assurance to lawyers that they could offer these unbundled services without getting dragged into representing the client on a wider basis. Fear of getting dragged beyond the agreed-upon scope of representation is one of the reasons lawyers don't offer unbundled services more frequently.
Because of the great weight given to whether states allow non-lawyer ownership of law firms, almost every jurisdiction received a grade of D. (The lone exception was the District of Columbia, which allows non-lawyer ownership under extremely limited circumstances, and which received a C.) If England and Australia were states, they would have received grades of A due to their more progressive approach to non-lawyer ownership.
Barriers to Affordable Non-Lawyer Help
The second area the report card graded was Barriers to Affordable Non-Lawyer Help. In other words, does the state allow consumers to use service providers other than lawyers to help them with matters that may be considered legal in nature?
Laws Restricting Non-Lawyer Help and Enforcement of Those Laws
First, we analyzed what the state's law says about the types of services that require a lawyer. Specifically, we looked at various ways in which competent non-lawyers could provide help (such as document preparation, financial advice, real estate closings, contract negotiations, and free advice from friends and family) and researched whether state law allowed or prohibited people from getting non-lawyer help for such activities. State laws range from draconian prohibitions to ambiguity, with few laws specifically allowing non-lawyer activity. The ambiguity in these laws is almost as bad as a prohibition, as a service provider is unlikely to offer a service that exists in a legal gray area.
Second, we analyzed the level of enforcement of unauthorized practice of law (UPL) restrictions. In other words, how often does the state prosecute this offense, what resources do they put towards prosecutions, and who is doing the prosecuting? States in which the attorney general has sole responsibility for prosecuting UPL were graded more harshly than those in which the state bar plays a significant role. In the former situation, UPL prosecutions are more likely to be undertaken in the public interest; in the latter they are more likely to be undertaken for anticompetitive reasons.
Grades in this area ranged from a B for Washington and 16 other states to an F for Florida, North Carolina, and Ohio. Washington is noteworthy in that it has just issued the first licenses for limited license legal technicians, or LLLTs. LLLTs are individuals with paralegal training who are licensed by the state to provide information and advice in family law matters, akin to the role of a nurse practitioner in medicine.
The states with the lowest grades earned them on the basis of overly aggressive UPL enforcement by the bar. For example, Florida has a $1.8 million budget for UPL enforcement that it has used for activities such as pursuing charges against a senior citizen who helped a fellow parishioner complete workers compensation forms.
Again, the low grades that most states received stand in stark comparison to more consumer-friendly countries. England, which licenses a wide range of non-lawyer service providers, would have received an A in this category. Australia would have ranked behind only Washington.
Treatment of Self-Represented Litigants
The third area the report card graded was court treatment of self-represented litigants. In other words, we wanted to know how easy it was for people to resolve disputes without a lawyer. We based grades in this area on the Justice Index, published by the National Center for Access to Justice at Cardozo Law School.
This grade took into account whether court forms and procedures are understandable to the average person, whether judges and court staff are trained to assist self-represented litigants, and whether courts have internal processes to monitor and review their treatment of such litigants. Hawaii was first in this category with an A grade; Mississippi was last with an F.
State Bars Have Yet To Comply with the Supreme Court's Dental Examiners Decision
Most of the obstacles to better access to the legal system stem from the fact that state bars frequently create rules governing the delivery of legal services without adequate oversight from the elected branches of government. When any group of professionals sets its own governing rules for the profession, its tendency is to favor itself at the expense of outsiders. Thus, established lawyers are likely to set rules that favor lawyers operating according to the status quo over outsider lawyers who may have revolutionary ideas about how to innovate the profession. And lawyers are likely to set rules that block competition from non-lawyers, no matter how competent their services and how much the public needs them.
The U.S. Supreme Court ruled earlier this year in North Carolina State Board of Dental Examiners v. FTC that professionals are not exempt from antitrust laws when they act without adequate oversight to limit competition. We hope that our report card will shine some light on state bars' continued reluctance to adhere to this principle. We also hope that it will demonstrate the desperate need of most Americans for affordable legal help and the failure of the organized bar to allow them to receive it.
Friday, November 6 is Love Your Lawyer Day. On this day, according to the American Lawyer Public Image Association (ALPIA), we should refrain from telling lawyer jokes and from “lawyer bashing.”
Responsive Law has never told lawyer jokes (although, speaking as a lawyer myself, the profession could certainly have a thicker skin about them), but we’ve probably been accused of lawyer bashing a few times. However, our disdain is not for lawyers as a profession, but for the system of unchecked self-regulation that allows lawyers to prevent competition and innovation that could benefit consumers.
So, on Love Your Lawyer Day, if you’ve used a lawyer and were happy with their services, feel free (as ALPIA suggests) to send your lawyer flowers, or make a donation to charity in their name. (Responsive Law would be an appropriate recipient!) But also ask your lawyer a couple of questions:
- Do you feel that you, as a lawyer, are the only professional who is competent to help me with legal matters?
- Do you believe that lawyers should only work under the supervision of other lawyers, and should not provide services to the public through a company with non-lawyer ownership.
If the answer to the first question is yes, you may want to hold off on that floral arrangement. Your lawyer wants to prevent you from using paralegals, financial planners, and a host of other less expensive professionals to address problems that the bar considers the exclusive domain of lawyers.
And if the answer to the second question is yes, you may want to make that charitable donation in someone else’s name. Your lawyer is standing in the way of innovation that could allow companies like Walgreens, Costco, or Sam’s Club (not to mention startups that are currently a glimmer in someone’s eye) to use economies of scale and better business practices to provide you a lawyer at a fraction of the $200/hour it costs you now.
After taking back your flowers and rededicating your charitable gift, ask your lawyer what he thinks of the Supreme Court’s February 2015 decision in North Carolina Board of Dental Examiners v. FTC. In this case, the Court held that a profession may not use its regulatory power to prevent competition unless the profession is adequately supervised by the state. Responsive Law field a brief in this case telling the court about how state bar associations do exactly this, filing complaints against non-lawyer competitors for the unauthorized practice of law.
Some would call our Supreme Court brief lawyer bashing. But we’d prefer to think of it as supporting consumers. Lawyers are no worse (and no better) in their ethics than any other profession. But they participate in a system that allows them to set their own rules, without public input.
So, on this Love Your Lawyer Day, ask your lawyer one more question:
3. Will you tell your state bar to abolish rules that solely protect lawyers’ interests, and to instead make rules that increase public access to legal help?
To be fair, some of the lawyers out there already are doing this. We’d like to send virtual bouquets to all the lawyers who have spoken out against the lawyer monopoly and in favor of innovation in the delivery of legal services. Thank you for being part of the solution, not part of the problem!
Unfortunately, many state bar associations are dominated by old-school lawyers who don’t want to change a system that has benefited them for decades, even if it’s at the expense of the public. Not only are those lawyers not going to get flowers from us, but we will continue to fight them until the public gets the affordable, accessible legal system it deserves.
If that’s lawyer-bashing, then Responsive Law is certainly guilty of it. But removing an entrenched monopoly from its anti-consumer perch is more important than the hurt feelings of a few lawyers.
The World Justice Project has released its 2015 Rule of Law Index, a comprehensive ranking of countries based on how their public experiences the rule of law. We've reported on the Rule of Law Index before, and sadly the story remains the same for the United States. While we rank among the world's leaders in most areas, we continue to bring up the rear among our peers in accessiblity and affordability of civil justice.
The WJP rated countries on 44 factors across eight categories, including open government, absence of corruption, civil justice, and criminal justice. The U.S. was ranked 19th of 102 countries overall, and was in the middle of the pack overall among its geographic and income-level peers. However, the story is very different when it comes to the Civil Justice category of "Accessiblity and affordability." Here, the U.S. was in a tie for 65th with countries including Pakistan, Tanzania, and Uzbekistan.
When compared to its peer countries for accessibility an affordability, the U.S. is even more dismal. We were next to last among 31 high income countries, narrowly edging out the United Arab Emirates to avoid a dead-last raniking. Even among upper-middle income countries, only four of 31 scored lower than the U.S. in this category. And our score in this category was far below any other country in North America and Western Europe.
What's most disappointing about the U.S.'s low ranking is that it comes despite our relative prosperity. For Americans of average means, legal help is less available than it is for those of average means in far poorer countries. This isn't due to a shortage of lawyers, but due to the inability of the American system to match people who need help with those who can provide it, brought on by the economic protectionism of bar associations. Eliminating antiquated rules that prevent mass-market consumer legal services—doing for legal help what H&R Block does for taxes—is one way to fix this problem. Rolling back restrictions on the unauthorized practice of law—allowing competent non-lawyers to provide basic legal assistance—is another. Reforming these areas is a must if the U.S. wants a justice system more accesible than that of an impoverished nation.
Yesterday, the U.S. Supreme Court ruled that anti-competitive policies created by state professional are not exempt from scrutiny when the regulatory body is not actively supervised by the state.
This decision, in addition to removing the antitrust exemption enjoyed by many bar associations, could have profound implications for the ability of lawyers to continue to prohibit their nonlawyer competitors from operating and exclude nonlawyers from the legal services market.
Responsive Law filed a brief in the case, North Carolina Board of Dental Examiners v. FTC, urging the Supreme Court to consider the negative effect that continuing to grant an antitrust exemption to these unsupervised professional boards would have on the expanding market of affordable and accessible legal services offered by nonlawyers.
Like the North Carolina Board of Dental Examiners, state bar associations, as a result of pressure from their members, have used cease and desist letters to put their unlicensed competitors out of business, which has allowed for the high monopoly rates lawyers currently have. As a result, over 80 percent of Americans have received no assistance with everyday legal needs, such as simple estate planning, arranging child custody, landlord-tenant disputes, or addressing consumer debt matters.
In this case, the Court held that a state dental board consisting primarily of dentists who were elected by other dentists and which was not supervised by the state was not exempt from antitrust action, despite its claims that it was exempt as a “state actor.” The Court noted that “[e]ntities purporting to act under state authority might diverge from the State’s considered definition of the public good. The resulting asymmetry between a state policy and its implementation can invite private self-dealing.” The Court explicitly suggests that State agencies who are both controlled by active market participants and who possess “singularly strong” private interests pose a very high risk of self dealing/promoting policies that will benefit their own private interests.
State bars, when they function in a regulatory capacity, act exactly as the dentists did in this case. State bar associations and their regulatory arms consist entirely or almost entirely of lawyers, and are elected or appointed by a membership consisting of lawyers. In the case of the bar, the use of its enforcement power over UPL has devolved from furthering the state’s policy interest in protecting consumers to furthering the bar’s interest in protecting itself from competition.
In ruling as we had urged, the Court held that a state agency “controlled by active market participants” must be subject to active supervision by the state in order to be immune from an antitrust claim. This active supervision must include an actual, non-rubber-stamp review of the agency’s actions and the supervisor’s ability to overrule or modify those actions.
In the case of the North Carolina dentists, the Court indicated that their unsupervised anticompetitive actions were not carrying out the will of the government. The Court states:
By statute, North Carolina delegates control over the practice of dentistry to the Board. The Act, however, says nothing about teeth whitening, a practice that did not exist when it was passed. After receiving complaints from other dentists about the nondentists’ cheaper services, the Board’s dentist members—some of whom offered whitening services—acted to expel the dentists’ competitors from the market. In so doing the Board relied upon cease-and desist letters threatening criminal liability, rather than any of the powers at its disposal that would invoke oversight by a politically accountable official. With no active supervision by the State, North Carolina officials may well have been unaware that the Board had decided teeth whitening constitutes “the practice of dentistry” and sought to prohibit those who competed against dentists from participating in the teeth whitening market. Whether or not the Board exceeded its powers under North Carolina law, there is no evidence here of any decision by the State to initiate or concur with the Board’s actions against the nondentists. (Majority opinion, p. 17, internal citations omitted.)
In this passage, one could substitute “lawyers” for “dentists,” “law” for “dentistry,” and “document preparation,” “self-help assistance,” or any number of other services for “teeth whitening” and the Court’s reasoning would still hold. There is no evidence that state bars are carrying out the will of the government when they act to expel their non-lawyer competition from the market through UPL actions. If dentists are not allowed to define the practice of dentistry without state supervision, then lawyers should also not be allowed to define the practice of law without state supervision.
So what will the ultimate impact of this ruling be? In the short term, it means that the 22 state bars that are currently acting without state oversight will need to refrain from UPL enforcement actions lest they be liable for antitrust violations.
In the long term, it’s likely that bars will get state supreme courts to fulfill the oversight function with regard to UPL enforcement. This would be better for consumers than no oversight at all, but not by much. State supreme courts are, of course, made up entirely of lawyers. While judges are not “active market participants” in the legal market, they are still more likely to view regulation from the bar’s perspective than a non-lawyer would be. They are also insulated from electoral accountability in a way that the executive branch isn’t. At a minimum, if the bar is to be involved in UPL regulation, it should be subject to the more popularly accountable oversight of the executive branch.
A better solution would be for state legislatures to take responsibility both for clearly defining UPL and for placing enforcement power in the hands of executive branch prosecutors. (The judicial branch may assert that separation of powers gives it exclusive power to regulate the practice of law, but it makes little sense for the judicial branch to have sole authority over areas of law that don’t involve appearing in court, such as transactional law or out-of-court advice.) Removing UPL enforcement from those who benefit from aggressive and anticompetitive enforcement actions is the only way to end the antitrust abuse and ensure that the public has access to affordable legal help in a competitive marketplace.
Josh King, general counsel and vice-president at Avvo, has called for a gutting of the current attorney advertising rules, both in Avvo's testimony to the ABA Future of Legal Services Commission and on his blog. He asserts (and we agree) that most of what is contained in lawyer advertising rules "is the crusty accretion of over-regulation." He also points out that "there is absolutely nothing in this dog’s breakfast of regulations that actually buys us any greater consumer protection. Anything egregious and harmful in attorney communication can be enforced via the general prohibition on false and misleading advertising."
Responsive Law has addressed the issue of anti-consumer restrictions on lawyer advertising several times and will continue to advocate for streamlining these byzantine and anachronistic regulations when they're considered by the ABA Commission.
The American Bar Association has convened a Commission on the Future of Legal Services to study ways in which innovation and new regulatory models can help meet the public’s needs for legal assistance.
Responsive Law has submitted the first in what it expects will be a series of comments to this commission. We told the commission that one of the main things the legal profession needs to do is to roll back many of the regulations that it has imposed to maintain the lawyer cartel over legal services. Restrictions on who may provide legal services are one of the largest obstacles to wider access to legal help. A lack of innovation in the business model of law is another obstacle. The latter is caused by regulations banning outside investment in law firms, which could allow them to serve everyday legal needs the way that H&R Block serves everyday tax filing needs.
You can read our comments to the commission here. As the commission continues its work, we'll be continuing to make sure it hears the voice of legal consumers, so stay tuned for further developments.
The Washington State Supreme Court is considering rules that would move the state one step closer to licensing non-lawyers to help consumers with certain legal matters. The court is reviewing proposed rules regarding limited license legal practitioners (LLLTs). These trained and licensed service providers would be able to provide certain forms of assistance to people needing assistance with family law matters. We wrote previously about LLLTs, describing what services they will and won't be able to provide consumers. Essentially, LLLTs will have training roughly equivalent to a paralegal and will be allowed to guide customers through legal processes, but will not be allowed to represent them in court.
The first class of LLLTs is currently finishing its training, so the court is finalizing ethics rules that would govern this new profession. Responsive Law submitted testimony to the court reemphasizing the need for this new profession, and urging the court to loosen proposed restrictions on the form that LLLT businesses can take. These restrictions would make it more difficult for LLLTs to work independently from lawyers and to form the type of creative business structures that could allow them to best serve their customers. You can read our testimony to the court here.