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Tom Gordon

Responsive Law, along with a coalition of law professors and alternative legal service providers has filed an amicus curiae brief in the U.S. Supreme Court case of North Carolina State Board of Dental Examiners v. FTC. The case concerns whether dentists on the state licensing board are exempt from antitrust law for their behavior in banning non-dentists from providing teeth-whitening services.

While dentistry is not part of Responsive Law’s mission, the case has important implications for the regulation of the legal profession and whether anyone besides lawyers will be allowed to provide legal services. The position of dental examiners in this case is directly analogous to that of lawyers who regulate the legal profession through state bar associations. In both cases, a group of professionals that has a financial self-interest in excluding outsiders has been given the power to regulate the profession. Unsurprisingly, in the case of both dentists and lawyers, the professionals have used this power to exclude outsiders. In both cases, it is the public who suffers, by being forced to pay cartel prices for services.

The damage caused by a self-regulating cartel is even greater in the case of lawyers than it is for dentists. The cost of the legal cartel is the denial of access to justice for the vast majority of the American population. When lawyer prices start at $200 per hour, only the richest people can afford to pay lawyers for everyday legal needs, such as simple estate planning, arranging child custody, landlord-tenant disputes, or addressing consumer debt matters. As a result, over 80 percent of Americans are unrepresented when such matters go to trial. And that number reflects the lack of legal help for crisis-level legal problems—those that are headed to court. An even greater percentage of people are priced out of legal help when facing these matters at an early stage, when basic legal help could prevent smaller issues from erupting into a crisis. Given these conditions, it’s no wonder that a recent study found that the US was tied with Kyrgyzstan, Mongolia, and Uganda in the affordability and accessibility of its legal system.

In the face of this access to justice crisis, state bars, many of which claim to be committed to equal access to the legal system, are concerned primarily with their own wallets. State bars have acted aggressively to shut down any attempt by non-lawyers to provide legal assistance to the large number of Americans who need help. State bars use their power to regulate who may practice law (and expansive definitions of the practice of law that they have created) to protect itself from non-lawyer competition. This type of cartel is exactly the type of danger that antitrust laws are designed to protect consumers from.

State bars argue that their behavior is exempt from antitrust regulation because they are given their power by the state government. However, private actors acting to restrict competition have not been viewed as exempt from antitrust enforcement merely because they are part of a state board. In fact, the ability of the bar to use state-granted power to enforce its monopoly makes its behavior even more harmful to consumers.

The self-regulatory nature of lawyer regulation is at the root of our access to justice crisis. If lawyers did not have the ability to use government power to protect themselves from competition, we’d see more innovation and lower prices in the legal services market, both from the innovative non-lawyer services that would be permitted to flourish, and from the innovation and lower prices that lawyers would be forced to provide to remain competitive in an open market. We hope the Supreme Court will agree when it hears the case on October 14.

David Feldman, a New York City lawyer, has a post in his blog today that concisely addresses many of the issues surrounding LegalZoom and other online legal service providers facing prosecution for the unauthorized practice of law (UPL). His post is worth reading, and gives me the opportunity to raise a few points that I've raised in other places about how the legal profession has responded to both competition and technology.

LegalZoom's product, other than automation, is not fundamentally different from books with accompanying forms that publishers like Nolo have been selling for decades. Decisions to prosecute LegalZoom and other online self-help services are driven by fear of technology and fear of competition—both of which are things that lawyers should embrace, rather than fear.

Rather than fearing technology, lawyers should make their services more available online, so that they can capture some of the market that LegalZoom has so successfully captured. And lawyers should better market the expertise that differentiates them from legal form providers. A lawyer can give you advice about whether to incorporate your business, rather than just the forms to do so, or advice about how to plan your estate, rather than the form for a will. If the public understood this, then lawyers would be better able to either compete with or work in conjunction with self-help services, rather than trying to eliminate them by using the bar's government-granted monopoly to make such services illegal.

The U.S. Army’s Fort Drum, in upstate New York, is home to about 13,000 soldiers and their families. Derek Distenfield is a soldier stationed at Fort Drum. After eleven years of service, Distenfield will be leaving the Army in September. Distenfield noticed that Fort Drum had a higher divorce rate than most military bases and decided that in his post-military career he would do something to help his fellow soldiers with divorce and other legal problems they face.

In 2012, Distenfield founded Legal Docs By Me, a legal document preparation service. The company uses non-lawyers to help people complete legal documents for matters such as uncontested divorces, wills, and incorporations. The company opened an office in Watertown, near Fort Drum, in May. It offers document preparation for divorce and several other services for a flat rate of $399.

Since most people can’t afford a lawyer at $200 to $300 per hour, the company helps fill a gap in access to justice for people with simple legal needs that don’t require the expertise of a lawyer. Without document preparation services, people who can’t afford to hire a lawyer are left to identify appropriate forms to create a legal document on their own. Books from companies like Nolo and online services such as LegalZoom have helped fill some of these unmet legal needs, but many people prefer to work with somebody face-to-face on these matters, as shown by the large number of satisfied customers visiting the recently-opened Watertown office.

However, businesses that give people access to the legal system without a lawyer are a threat to lawyers’ monopoly, and recently New York Attorney General Eric Schneiderman has been on a mission to shut down Legal Docs by Me. Schneiderman is claiming that the business engaged in the unauthorized practice of law (UPL), and he ran an undercover sting operation to try to find evidence that paralegals at the business were providing legal advice.

Running a sting operation shows the desperation of a prosecutor trying to generate evidence of a crime with no victims. If consumers were being harmed by the alleged UPL at Legal Docs by Me, then the attorney general would have no trouble producing testimony from the victimized consumers. Instead, customers continue to flock to the business, and not a single UPL “victim” has come forward.

Even if a paralegal at Legal Docs by Me accidentally crossed the blurry line between permissible help and practicing law, it’s a misuse of prosecutorial resources to try to shut down the company. Undoubtedly, at law firms across the state, paralegals have crossed this line on multiple occasions. However, the attorney general is not sending undercover investigators into Manhattan law firms to ferret out paralegals who accidentally step into the forbidden territory of legal advice. This is clearly a case of the state’s chief lawyer using his prosecutorial power to protect his professional brethren. The attorney general should focus his office’s resources on real crime rather than trying to shut down a business that is helping to bridge the access to justice gap.

Michael Zuckerman, writing for The Atlantic, has written an excellent article, asking “Is There Such a Thing as an Affordable Lawyer?” The answer is, in short, is no. Not today, at least. Zuckerman cites the case of Ned Henry, who was priced out of an Attorney’s services in a dispute with a landlord. Zuckerman traces the source of the high prices associated with legal assistance – and he winds up circling the Bar’s monopolistic control of the legal services market. Two alternative models for legal services get the spotlight in the article: The first is the DIY model, based on the “legal equivalent of TurboTax.” The second is a model centered around limited-scope representation, where an attorney would focus on quick (and cheap) advice and expertise, offloading much of the actual labor onto their clients.

The article provides an excellent overview of many of the problems preventing people from having access to affordable legal services. However, Zuckerman touches only briefly on two of the biggest systemic obstacles to affordable legal help.

First, the bar gets its monopoly over providing legal services from statutes and regulations prohibiting the unauthorized practice of law (UPL). These UPL laws, enacted under the pretense of consumer protection, declare a wide range of activity to be the "practice of law," making a lawyer the only legal service provider available, no matter how competent other services may be. Thus, the LegalZooms and Rocket Lawyers face legal challenges to the right of their business to exist in multiple states, and hundreds of less-capitalized innovators fold in the face of overwhelming regulation. Bar associations have brought legal actions against innovative service providers even in the absence of any public complaint. In England, professionals other than lawyers are allowed to perform a wide range of legal services, and consumers have been overwhelmingly satisfied with their performance. American UPL restrictions need to be reformed to allow competent non-lawyer professionals to serve customers and to require a showing of harm to a customer before a case can be brought.

Second, law is unique among American industries in forbidding outside investment in legal practices. Law firms serving average Americans (rather than large corporate clients) typically employ at most a dozen lawyers, making it impossible to create the economies of scale that would allow them to affordably serve customers. In contrast, if outside investment were allowed, a national company could develop training and supervision protocols for thousands of lawyers, teaching them how to provide legal services to their clients and providing not only the legal expertise they need, but also letting those lawyers focus on their core competency of practicing law, while letting a corporate office handle the business side of practice. This isn't merely a hypothetical idea. In Australia and England, outside investment is permitted. As a result, customers are already seeing more affordable lawyer help, both from existing firms taking advantage of additional capital to improve their operations, and from companies outside the legal sector bringing their business and customer-service expertise to bear in a new market. Unfortunately, the American Bar Association has strongly opposed even modest changes to the outside investment prohibition.

These twin restrictions are a drag on innovation, and impede the advancement of the many innovations the article describes. Until they are reformed, American consumers will be left far behind their overseas counterparts in access to the legal system.

A recent article by Stanford law professor Deborah Rhode outlines the results of the most comprehensive study of unauthorized practice of law (UPL) enforcement in many years; since her own study in the early 1980s, in fact. The entire article is worth reading. However, I’d like to call particular attention to a few points that illustrate that while the bar has grown more rhetorically adept at making the argument for wide prosecution of UPL cases, the facts underlying that argument remain as unpersuasive as they’ve been for decades.

The bar frequently argues that prosecuting UPL cases is necessary to protect legal consumers from fraud. Yet a 1981 study by Rhode showed that over half of bar respondents didn’t even take consumer complaints on UPL issues, and only a tiny percentage of UPL cases were based on consumer concerns. According to those results, the bar’s argument that UPL was aimed at helping the legal customer fell entirely flat. 

Although Rhode’s new study appears to show that UPL authorities are now more likely to consider consumer harm, it actually only demonstrates that the bar has gotten better at saying what it thinks the public wants to hear. In Rhode’s new survey, almost all of the respondents claim to have taken at least a quarter of their UPL complaints from legal customers. However, when Rhode continued her interviews, she found that over two-thirds of the respondents could not name a situation during the past year where a UPL issue had caused serious public harm. Even though they were apparently taking at least 25% of all UPL complaints directly from ordinary consumers, the bar respondents did not know how UPL had hurt those legal customers. Either those surveyed had very bad memories, or consumer harm was not their true motivation for UPL prosecution.

The bar often uses the fear of “notario fraud” to build support for broader UPL laws. In Spanish, the meaning of the word ‘notario’ varies from country to country—in some countries it means ‘notary’ and in some it means ‘lawyer’. People emigrating from countries where ‘notario’ means ‘lawyer’ can be misled into believing that someone who is a notary is actually a lawyer through essentially false advertising. These scam artists can also use other misinformation to defraud immigrants with little knowledge of English or the American legal system. Without UPL restrictions, the argument goes, these people would be even more vulnerable to legal fraud. 

In reality, the bar is using the fear of notario fraud as the camel’s nose under the tent to enact sweeping UPL laws that encompass all sorts of services that are helpful to consumers, rather than the small minority that are fraudulent and harmful. In Rhode’s study, only about 3% of the total UPL cases litigated dealt with immigration. Of course, those engaging in this sort of fraud can—and should—be prosecuted under existing consumer fraud laws.  In fact, Rhode speculates that prosecution of notario fraud “when it occurs, happens under fraud and theft statutes rather than UPL statutes.” Essentially, the consumers whom the bar uses as a prime example of the need for UPL make up just a tiny percentage of the actual cases prosecuted. So who exactly is protected by the remaining 97% of UPL cases? If there are consumers being protected by these cases, one would think the bar would mention them more often, rather than focusing its arguments on notario fraud. 

Courts are also complicit in the pro-lawyer, anti-consumer bias found in UPL cases. Rhode’s article shows that courts adjudicating UPL cases rarely considered whether people were hurt by alleged UPL, much less how they were hurt. Only about a quarter of reported cases discussed public harm when litigated, despite the bar’s continued statements that UPL exists to protect the consumer. In the court cases where it was mentioned, public harm was used only to aid in determining a penalty, rather than to discuss how UPL harmed the consumer in question. Thus, even if UPL restrictions are intended to protect consumers, courts are not applying them for that purpose. 

Cases that are litigated under UPL restrictions can also include legal services rendered which were actually helpful to consumers. Regardless of whether or not the person offering legal services provided a useful or even desperately needed service, he/she can be penalized under UPL restrictions. If these rules existed to protect and aid legal customers, as the bar states, a legal service that was helpful to the person receiving it should not be litigated under UPL. Yet Rhode found evidence supporting the lack of interest in interpreting UPL cases from a consumer point of view—only 11 percent of the UPL cases discussed whether or not the violation in question had met an important public need. The UPL services in question may have actually benefited legal consumers, but the bar and the courts chose to ignore the interests of the public.

One of Rhode’s conclusions is that “[a] more consumer-oriented approach would also vest enforcement authority in a more disinterested body than the organized bar.” The bar may state that UPL litigation is aimed at protecting the consumer, but Rhode’s article proves that this is a tired statement without much substance. While the bar may have become more adept at selling this argument, it’s no more true than it was when Rhode first studied the topic three decades ago. 

Richard Zorza has an excellent blog post this week on a new program announced in New York Chief Judge Lippman’s 2014 State of the Judiciary Speech. The Court Navigator pilot program will provide “trained volunteer non-lawyers” to help unrepresented New Yorkers in Brooklyn and the Bronx navigate Housing Court and consumer debt cases. Here at Responsive Law, we have long argued that providing consumers with non-lawyer options for legal assistance is a core issue for providing real access to justice throughout society. We applaud Chief Judge Lippman’s continued efforts to address the legal needs of the most vulnerable New Yorkers.

But even as we cheer, we must also exhort Chief Judge Lippman, and New York as a whole, to push onward. Programs like the Court Navigators should be embraced and expanded, and policymakers should seek other ways to increase consumer choice and access to legal services. In England, for example, litigants are entitled to the assistance of a “McKenzie friend”—someone who may provide support and advice in navigating the case, and crucially, need not be a licensed attorney.  Likewise, New York Senate Bill 427, which Responsive Law has endorsed, would allow New Yorkers to choose non-lawyer representation in housing court cases.  Both of these would provide much-needed legal assistance to those who, unable to afford the price of a full attorney, today must to stand in court alone.  The Court Navigator program is certainly good news, but if it is truly a “milestone in the development of access to justice,” as Mr. Zorza claims, then we have miles further to go.

There's an excellent blog post by Ron Friedmann at Prism Legal arguing for abolishing the prohibition on outside investment in law practices, a position that Responsive Law strongly supports. In a responding blog post, Brian Focht at The Cyber Advocate claims that only bankers would benefit from lifting this restriction, and that those who want to do so are only interested in making more money. It's a common objection, so we'd like to address it here.

Focht writes:

"Most of the people asking for non-lawyer ownership in law firms have a vested interest in the deregulation of the practice of law. Whether they want to be the law’s version of Turbo Tax, or whether they simply want to earn profitable returns out of a law firm’s revenue, how many of them really and truly want to create a better, cheaper, and more accessible law firm? How many of them really want to improve access to justice? How many of them just want more ways to make more money?"

Since Responsive Law's purpose is to speak on behalf of users of the legal system, we are most certainly taking this position as a way to improve access to justice and not as a way to make more money. We've testified numerous times to the ABA and state policymakers about the benefits of non-lawyer ownership. And we're a nonprofit organization, so we certainly don't have a financial stake in the improvement of the system.

The greatest benefit of outside investment won't come from a change in the practice of existing firms. Instead, it will come as other companies, both new and existing, are able to offer law as a consumer service on a scale that solos and small firms—the predominant deliverer of services that the average person needs, such as wills, family law, housing, and employment issues—are unable to offer. For example, a national company could develop training and supervision protocols for lawyers, teaching them how to provide legal services to their clients and providing not only the legal expertise they need, but also letting those lawyers focus on their core competency of practicing law, while letting a corporate office handle the business side of practice.

There is a clear disconnect between the 80 to 90 percent of Americans who cannot afford basic legal services and the growing number of recent law school graduates who currently have no employment prospects. Corporately-provided legal services would bridge this gap and allow the true democratization of law. Consumers would be able to take advantage of economies of scale that do not exist for small firms and newly-minted lawyers would be able to receive training and employment providing legal services at an affordable price.

Concerns that lawyers would shirk their ethical duties under pressure from corporate owners and investors are misplaced. Lawyers in every setting face financial pressures to act against their clients' interests. For example, associates at large firms face pressure to pad hours to meet billable hour goals. However, this financial pressure does not relieve an attorney of the obligation to follow the rules of professional conduct, and neither would financial pressure from shareholders. As an additional safeguard, the US could adopt a version of Australia's requirement that each firm with outside investment designate an officer to be responsible and liable for ethics violations.

Both the UK and Australia have permitted non-lawyer ownership for several years, and have shown that consumers benefit from the innovation it fosters, while predictions of diminished lawyer professionalism have been proven wrong. It is past time for the US to join its international brethren in adopting this reform.

 

New York State Chief Judge Jonathan Lippman has announced a new rule intended to better supply legal aid to poor New Yorkers. Specifically, in-house corporate attorneys who work in New York but are not members of the New York State Bar will now be permitted to do pro bono work in New York civil and criminal cases. Previously, only attorneys licensed to practice in New York were able to volunteer their expertise without restrictions. The change is intended to widen the volunteer pool that groups like the Legal Aid Society draw on to provide legal assistance to New Yorkers unable to afford a lawyer. The New York Times reported that “the measure has broad support, not only from the state and city bar associations, but from several big businesses seeking to burnish their image.” Responsive Law likewise supports this development, but New Yorkers deserve more.

Responsive Law has long been a supporter of Judge Lippman’s efforts to facilitate poor and middle-class New Yorkers’ access to their legal system.  However, this rule change is minor compared to the scope of the problem. The Legal Aid Society took 48,000 cases last year, but they were forced to turn away eight times that number – over 300,000. Why? Because there are not enough lawyers to meet the demand for legal services.

This rule change is a positive development, but according to Judge Lippman’s own estimate, it will only increase the pool of potential volunteers by a mere 5,000 lawyers. This will barely make a dent in New Yorkers’ unmet need for legal advice.  More profound reforms are needed to give all New Yorkers access to their legal system. Responsive Law has a two-pronged solution to the problem. 

First, competent non-lawyers should be permitted to supply legal services. Currently, social service organizations’ attempts to assist New Yorkers in navigating the courts are stifled by the requirement that only attorneys may provide legal services. These organizations should be able to use people who have expertise, but not a law degree, to provide assistance to those they serve. Non-lawyers are perfectly capable of helping to navigate the court process, a service which in many cases will be more valuable than the full legal analysis offered by attorneys. Imagine how many people Legal Aid could help every year if their volunteers could receive a few weeks or months of training in a specific field, rather than needing to spend years and thousands of dollars to get a general-purpose law degree.

Second, New York should allow outside investment in legal service providers, which is currently prohibited. There may be ways for lawyers in the private sector to deliver their services more efficiently, bringing the cost of a lawyer within the reach of even poor New Yorkers. Services like TurboTax and H&R Block have helped millions of Americans by making accounting expertise cheaper and more widely available. Where is the innovator who will do the same for legal matters? They have been locked out of the industry by these outdated regulations.  New York, and likewise the rest of the United States, should look to the success of liberated legal industries in Australia and the UK, which have lifted the restrictions without harm to consumers. (For more about mass-market legal services, please see our testimony.)

The public’s need is too vast to be serviced by the small number of lawyers who work or volunteer in low-income legal assistance. Increasing the number of lawyers who are allowed to volunteer their services is a step in the right direction, but we must make great strides to provide justice to all New Yorkers.

Sunday, 13 October 2013 00:00

CA Governor Vetoes UPL Expansion

California Governor Jerry Brown has vetoed Assembly Bill 888, which would have given the State Bar of California additional incentive to pursue civil lawsuits against those it considered to be engaged in the unauthorized practice of law.If the bill had been signed into law, the bar would have allowed the awarding of attorneys fees to the br when it successfully sued its economic competitors. Service providers such as legal document assistants, tax preparers, and financial planners would have all faced a strong disincentive to provide their services to consumers, under threat of a lawsuit from the bar and the possibliity of paying both damages and lawyers' fees should they lose such a suit.

Responsive Law led the effort against passage of AB 888. Its testimony led to amendments to the bill which would have required money the State Bar received from UPL cases to go toward victim restitution, rather than to the general treasury of the State Bar. However, the bill still did not require a showing of actual consumer harm for a court to find that UPL had occurred. Since Responsive Law believes that any UPL case that does not involve consumer harm is merely economic protectionism for lawyers, we refused to drop our opposition to the bill. Governor Brown's veto message noted that the State Bar and state and local prosecutors already have sufficient power to enforce UPL law, indicating agreement with our position that this bill was a power grab by the State Bar, and not an honest attempt to protect consumers.

You can read Responsive Law's testimony opposing AB 888 here, or our previous discussion of this legislation here.

Tuesday, 03 September 2013 12:27

ABA's "Legal Rebels" List Gets With the Program

What a difference two years can make!

A couple of years ago, I wrote about the ABA Journal's 2011 list of "Legal Rebels"—lawyers who are changing the legal profession. The 2011 list consisted mostly of lawyers who were making minor adjustments to the structure of large law firms. Only two of the ten Legal Rebels that year were doing anything to make law more accessible to the general public. The 2011 list continued the magazine's trend of largely ignoring those who made a real difference in favor of corporate lawyers who were making changes that inched the profession toward the 21st century.

The ABA Journal has just released its 2013 Legal Rebels list, and the list is quite different from two years ago. Not one of the ten lawyers on the list comes from a large law firm, and several are true innovators. One of this year's honorees is Raj Abhyanker, the founder of Legal Force, a Palo-Alto company that offers customers a storefront of user-friendly legal books and forms to choose from and affordable 15-minute consultations with onsite lawyers. Another slot belongs to Michael Poulshock, whose Hammurabi Project aims to automate large bosies of law to make them understandable and usable by both lawyers and nonlawyers. And Renee Knake and Daniel Katz of Michigan State University's Reinvent Law program are training law students to reach the unserved middle class using innovative business models and technology.

In 2011, I noted that many innovators were hampered by prohibitions on outside investment in law practices. Those bans are still in place, but not if some of these Legal Rebels have anything to say about it. Professor Knake's scholarship focuses on these bans, which she believes are unconstitutional. The future may be closer than we think.

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