The first two fully licenced alternative business structures (ABSs) have been approved by the state of Arizona. On the 17th March 2021, two businesses, Trajan Estate LLC and Gilbert and Payne Huebsch PLC received their ABS license after the State Supreme Court approved their bids. Trajan Estate is a legal service provider focused on estate planning while Payne Huebsch provides transactional legal services paired with tax and accounting advice.
Last year Arizona became the first state to fully allow alternative business structures and non-lawyer ownership in law firms, revoking state professional conduct rule 5.4 which barred nonlawyers from fee-sharing and holding an interest in law firms. The change came into effect in January 2021, allowing business to begin the approval process.
The licenses follow the approval of the first non-lawyer owned law firm in Utah, as part of the state’s two-year regulatory sandbox. Law on Call opened at the beginning of March 2021, allowing consumers unlimited over the phone access to lawyers, in a business entirely owned by non-lawyers. The business will however be subject to license reviews, as per the conditions of the sandbox.
Read more about the Arizona licences here, or the Utah licences here.
A California State Bar working group established to study access to justice innovations held its first public meeting on the 14th January 2021. The State Bar’s Closing the Justice Gap Working Group, created by the Board of Trustees to carry on with important recommendations from the State Bar’s Task Force on Access Through Innovation of Legal Services (ATILS), has been established with the objective of:
- Investigating the development of a regulatory sandbox to foster experimentation with innovative systems for delivery of legal services
- Exploring amendments to the Rules of Professional Conduct regarding the ability of lawyers to share fees with nonlawyers
- Examining the addition of rule 5.7 to the Rules of Professional Conduct addressing the delivery of nonlegal services by lawyers and businesses owned or affiliated with lawyers
- Considering amendments to the Certified Lawyer Referral Service statutes and Rules of the State Bar to enhance efforts to expand access to legal services.
The task force chair Justice Alison M. Tucher, Associate Justice of the California Court of Appeal, First Appellate District, Division 4, in San Francisco has said “The immense challenges of the past year have only heightened the needs that this group’s work is intended to address. Fortunately, meeting virtually enables us to bring together a truly remarkable working group, all of whom are volunteering their expertise to help California move forward. We are honored and excited to get started.”
The working group is made up of 20 state, national, and international experts an is expected to submit recommendations to the Board of Trustees no later than September 2022. Each recommendation is expected to balance the dual goals of public protection and increased access to justice.
Read more about the meeting here.
On September the 10th the Law Society of British Columbia elected to make changes suggested by a task force on modernisation established this January.
The task force cited ongoing changes in the legal market, which have been accelerated by the ongoing COVID-19 pandemic, as well as the pace of change in other jurisdictions, as to why change was needed.
- evaluate how existing and emerging technologies can better support legal services and address regulatory impediments that exist in permitting their use
- move to amend regulatory structures to allow for innovation in legal service delivery and alternative business structures while protecting the public
- re-evaluate current regulations and restrictions on law firm ownership and investment, as well as multi-disciplinary practice and partnership structures to ensure they are not inhibiting innovation
- advance its initiative on the regulation of licensed paralegals to improve access to legal services
- regularly reach out to and develop resources to support in-house counsel and government lawyers
- continue work on Indigenous legal services by understanding where more support is needed and listen to and work with Indigenous peoples to address that need
- re-consider the accreditation process for lawyers in British Columbia, with special consideration given to how to incorporate more skills-based training into that process
The task force was set up with the following mandate: “Recognizing that significant change in the legal profession and the delivery of legal services is expected over the next five to 10 years, the Futures Task Force will identify the anticipated changes, consider and evaluate the factors and forces driving those changes, assess the impact on the delivery of legal services to the public, by the profession and on the future regulation of the legal profession in British Columbia, and make recommendations to the Benchers on the implications of the anticipated changes and how the Law Society and the profession might respond to the anticipated changes.”
And began the recommendations by saying: “Change is constant in all aspects of our lives, and this is true in the practice of law as well. Client expectations, competition among lawyers and with other professionals, technology, generational expectations, and societal norms all affect what lawyers do and how they carry out their practice in important ways. Society’s expectations of what lawyers do and how they should do it also change. How lawyers keep up with these changes is very important for the availability of efficient and affordable legal services and for the confidence that the public has in the legal profession as a whole, and equally important for the sustainability of their practices and their personal well-being. A legal profession that is incapable of achieving outcomes that resonate with what society expects is one in which the public will eventually lose confidence. ”
Read the full recommendations here (PDF).
The Arizona Supreme Court has approved rule changes allowing for non-lawyer ownership of law firms in the state. The rule change comes in the wake of the two-year sandbox announced in Utah, however, the Arizona courts went one step further, opting to make the changes permanent.
The recommendations for the rule change were first proposed by the court’s Task Force on the Delivery of Legal Services, have focused around improving public access to affordable legal services and promoting legal innovation. The changes in state’s rules are set to become effective as of January 1st 2021. The changes include the removal of ER 5.4 the rule barring nonlawyers from fee sharing and barring nonlawyers from having an economic interest in a law firm. As well as this the changes also allowed for the licensing of legal paraprofessionals, as well as changes to lawyer advertising rules.
Arizona Supreme Court Chief Justice Robert Brutinel said of the development, “The Court’s goal is to improve access to justice and to encourage innovation in the delivery of legal services. The work of the task force adopted by the Court will make it possible for more people to access affordable legal services and for more individuals and families to get legal advice and help. These new rules will promote business innovation in providing legal services at affordable prices. I thank and commend the Task Force and its chair, Vice Chief Justice Timmer for their groundbreaking work.
Read the full report from the Arizona Supreme Court.
Utah has become the first state in the US to allow non-lawyer ownership of legal services providers. This month the State Supreme Court unanimously voted in favour of approving a 2-year sandbox programme which would licence new forms of legal services ownership.
The move has come about in the face of continued concerns over access to justice, particularly in the face of the ongoing COVID-19 pandemic. The courts have cited the reasoning that regulation should focus primarily on serving the consumer, and acting in their best interests, with Utah Supreme Court Justice Deno Himonas saying “changes will enable individuals and entities to explore creative ways to safely allow lawyers and non-lawyers to practise law and to reduce constraints on how lawyers market and promote services. New forms of providers could include partnerships, corporations and companies and non-profit organisations partnering with other entities to offer legal services.”
Whilst the Utah profession is comparatively small, with 26 lawyers per 10,000 residents compared with 92 in New York and 43 in California, the result of the sandbox will be closely watched by other state bars, particularly in the light of similar moves being discussed in California, and calls by the ABA for other states to follow suit.
Read more about the decision or view the standing order.
The Board of Trustees of the State Bar of California took a 9-2 decision on the 14th May 2020 to form a working group to look into forming a regulatory sandbox in which innovative legal service providers would be subject to fewer regulations. This could include limiting unauthorised practice of law rules, as well as removing limits on fee sharing and partnership between lawyers and non-lawyers.
The decision is a major step forward in a potential move towards innovative business structures in California, following a vote to delay the decision by the Board in March, with board members saying they needed more time to consider the proposals.
Following the board meeting, which was held over Zoom, Chairman Alan Steinbrecher (who as Chairman did not vote) said: “This is a significant step and I think it will lead to an exciting future,”.
For more information see:
Arizona has become the first state in the US to formally file for the introduction of Alternative Business Structures (ABSs) in the US. The Arizona task force on the delivery of legal services has filed a petition with the Arizona Supreme Court which suggests eliminating rules which prevent fee sharing with non-lawyers and entering into a partnership with non-lawyers.
The petition is quoted as saying “Eliminating the rule would mean, for example, that a professional nonlawyer administrator in a law firm could have an ownership interest or that a Fortune 500 company could be a passive investor. It also could mean that a law firm could attract nonlawyer talent… by providing equity in the firm”.
The petition has also suggested introducing limited license legal practitioners to the state, filling a gap for lower-cost legal services and helping to bridge the justice gap in the state.
Following the March 2015 report submitted by the Advokatlovutvalget (the Lawyer Commission), which suggested changes to the regulation of lawyers in Norway (Report in Norwegian available here), the Norwegian Ministry of Justice and Public Security has decided to further evaluate the recommendations.
The Ministry has commissioned research consultancy Copenhagen Economics to provide further analysis on two of the proposed changes: 1) the regulation of the right to provide legal services, and 2) the ownership regulation for law firms.
The report has suggested that the current competitive climate for legal services in Norway is relatively good, with no signs of a decline in competition and good competition between smaller firms and larger firms, especially for less complex cases. The report also suggested that increased liberalisation of legal activities, particularly non-court based activities would prevent a monopoly forming around legal services, and would allow new entrants to enter the market. The report also recommended that ownership regulations should not be tightened. Currently, anyone in Norway can hold a stake in a law firm, provided they spend a “significant part” of their professional activity in the firm’s service. The Lawyer Commission had proposed only allowing lawyer ownership of firms. The report has suggested that this is not appropriate as it stifles innovation and capital investment, and therefore competition.
Copenhagen Economics English language summary of the report is available here.
The full report in Norwegian is available here.
On February 17th, during its annual midyear meeting, the American Bar Association (ABA) House of Delegates approved resolution 115, encouraging State Bars to consider innovative approaches to expanding access to justice, particularly focused around improving the affordability and quality of civil legal services.
The resolution initially proposed by the ABA Center for Innovation and supported by several standing committees of the ABA Center for Professional Responsibility, calls on state regulators and Bars to consider regulatory innovations that would improve accessibility, affordability and quality of civil legal services. The resolution initially faced strong opposition from several Bar Associations. However, the resolution received overwhelming support from 596 member house following the addition of a provision stating: “Nothing in this resolution should be construed as recommending any changes to any of the ABA Model Rules of Professional Conduct, including Rule 5.4, as they relate to non-lawyer ownership of law firms, the unauthorized practice of law or any other subject.” Rule 5.4 limits sharing of legal fees with non-lawyers as well as bars non-lawyer equity in law firms.
Further details about the meeting and the resolution are available here.
The proposed resolution and report are available here, with the final resolution available here.
The regulatory framework relating to the legal professions in Québec reached a turning point in the 2000s, following the adoption of the Règlement sur l’exercice de la profession d’avocat en société et en multidisciplinarité. More than a decade later, this article examines the negotiation surrounding the drafting of the Règlement, and the various arguments put forward by the Barreau du Québec and other professional corporations to justify its adoption. Data from the registre des entreprises are then used to examine the extent to which Quebec law firms have taken advantage of the diverse legal options at their disposal to organize their activities.
Paquin, Julie, Practising As a Lawyer in a Partnership and Multidisciplinary Practice in Québec: Progress and Prospects (L’exercice de la profession d’avocat en société et en multidisciplinarité au Québec : bilan et perspectives) (september 1, 2017). Les Cahiers de droit, Vol. 58 (3), 2017, 383-607 .
Available from the SSRN site.