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Arizona Takes Step to Scrap Rule That Keeps Big Four Out (1)

Oct. 7, 2019, 6:24 PM

An Arizona task force is urging the state’s supreme court to end restrictions on nonlawyer co-ownership of law firms to close the “access to justice gap,” which could crack open the door to the Big Four accountancies.

The Arizona Task Force on the Delivery of Legal Services in an Oct. 4 report requested the removal of state bar Rule 5.4, the “explicit barrier” to lawyers and nonlawyers co-owning businesses that engage in the practice of law.

“A sentiment that resounded within the workgroup was that lawyers have the ethical obligation to assure legal services are available to the public,” the 157-page report concluded, “and that if the rules of professional conduct stand in the way of making those services available, then the rules should be changed.”

The Arizona panel’s actions are part of a growing movement of state and national bar groups currently acting to loosen or repeal law firm ownership and related regulations. Big Law leaders have expressed concern about the trend, which could allow the Big Four—EY, Deloitte, KPMG, and PwC—and other alternative legal service providers to take a more direct competitive stance against U.S. law firms, especially if several larger states adopt such changes.

At the same time, the 20-member task force took steps to ensure that the main goals of Rule 5.4—based on the American Bar Association model rule of the same number—are upheld. The rule’s intent is to help maintain the professional independence of lawyers, and protect the public from unscrupulous actors.

The Arizona panel, led by Ann A. Scott Timmer, vice chief justice of the state’s Supreme Court, suggested that the court “immediately” convene a group to explore regulation of legal entities in which nonlawyers have a financial interest.

New Legal Assistance

In August, the panel voted to loosen the rules that currently restrict legal document preparers from assisting court litigants.

The report codified those recommendations, and took several additional steps to make sure court litigants get legal assistance even if they cannot afford an attorney.

That includes the creation of a new tier of legal service provider specifically designed to assist domestic violence victims, and the separate development of another tier of nonlawyer legal service providers, “qualified by education, training, and examination,” to provide limited legal services.

Those recommendations were a priority for task force member Stacy Butler, director of the Innovation for Justice Program at the University of Arizona James E. Rogers College of Law. Marginalized populations are particularly vulnerable to navigating legal issues like eviction proceedings without accessible and affordable help, she said.

“I think we have a lot of potential to change outcomes for low-income populations,” Butler said.

Task forces in Utah and California began studying similar issues at roughly the same time as the Arizona panel. State bar groups in New Mexico and Oregon also have put forth more limited proposals.

In late August, the Utah Supreme Court quickly approved the recommendations of a task-force report on legal reform in that state, including allowing non-lawyers to share fees in legal operations.

A small but elite national bar group called the Association of Professional Responsibility Lawyers is also collecting data to support its own upcoming report on the need for legal services reform.

Dissenting View

The panel’s recommendations were not unanimous. Task force member Peter Swann, the chief judge of the Arizona Court of Appeals, Division I, took strong issue with the elimination of Rule 5.4, which he said would pose “a serious threat to the long-term health of the justice system.”

The recommendation would allow “disbarred lawyers, large corporations, and venture capitalists to have full equity stakes in law firms while escaping any duties to the clients,” Swann wrote. “The proposal would surely open vistas of new sources of wealth for lawyers, but it would not benefit the public.”

The proposals will need to pass through several more hoops before they can be finalized, according to an Arizona Supreme Court spokesman. The Arizona Judicial Council, the policy-making body that oversees the state’s justice system, will need to approve the proposed changes, likely before the end of this year.

Then, the public will have a chance to comment before the seven-member Arizona Supreme Court weighs some time in or around August 2020. If approved, the changes would be made effective in January of 2021, the spokesman said.

Arizona’s task force formed last November at the direction of then-Chief Justice Scott Bales, now the executive director of the Institute for the Advancement of the American Legal System at the University of Denver.

Bales’ administrative order establishing the task force stressed that promoting access to justice, in large part through more affordable services, was its primary aim.

“Changes in technology, the legal profession, and the economy call for a reassessment of the delivery of legal services to consumers more broadly,” he wrote.

Zachariah DeMeola, a manager for the institute Bales heads, said opposition to legal services delivery reforms —like comments on recent California task force recommendations—show that people need to be better-educated on the proposals.

“This is not deregulation,” he said.

To contact the reporter on this story: Sam Skolnik in Washington at

To contact the editors responsible for this story: Jessie Kokrda Kamens at; Rebekah Mintzer at