Florida Joins States in Testing Law Firm Ownership Models (1)

Florida plans to test new law firm ownership models, boosting competition among a handful of states that are racing to make legal systems more cost efficient and accessible to consumers.

Florida’s test, which is still in the early stages of development, would “eliminate the current restriction that limits a lawyer’s ability to decide with whom the lawyer associates,” a report from a Florida Supreme Court committee said. Firms, however, wouldn’t be required to offer non-lawyers an equity interest.

The Law Practice Innovation Laboratory Program, as the Florida committee calls the effort, was approved “in concept only,” the report said. The committee needs to set up details of how the experiment will work, and it’s unclear from the report when that will be.

The move adds national momentum to the push to enact regulatory reforms that promote access to justice and technological and business innovations to the long-stodgy legal industry. Utah, British Columbia, and Ontario are currently operating their own regulatory tests, and California is weighing a similar program.

Several other states, such as New York, Illinois, and North Carolina, are debating regulatory reforms that could include experiments.

“States cannot afford a wait-and-see approach, and we appreciate Florida taking action now,” said Zack DeMeola of the Institute for the Advancement of the American Legal System. The institute, founded in 2006 at the University of Denver, advocates changes designed to fix legal system flaws.

The Florida Supreme Court in late 2019 requested the creation of the Special Committee to Improve the Delivery of Legal Services. The committee said Florida’s test—similar to what other states call a regulatory sandbox—would in many ways model itself after Utah’s program.

That Utah sandbox—the first of its type in the country—has approved almost 30 participants so far, ranging from Rocket Lawyer, a company of more than 250 employees, to much smaller operations like Xira Connect, a software-based platform that links legal consumers with Utah attorneys and state-licensed paralegal practitioners.

Like Utah, the Florida Lab would collect data on non-traditional legal services providers as the program goes forward to determine which types of models work—and to make sure each company is safe for legal consumers to use.

The committee, however, said its test would let non-lawyers have only non-controlling equity interests in firms. That is similar to a rule in Washington, D.C. The Florida Lab also would mandate that non-lawyers in new entities “actively support the work of the law firm.”

Florida’s changes “are more modest than what we believe is needed to fully address the current crisis in access to legal services,” said DeMeola who is director of legal education and the legal profession at the Denver-based institute.

Still, he added, “We are encouraged by the Committee’s emphasis on the critical need for change, the recognition that states must be open to new ideas, and the recommendation of a Utah-style regulatory sandbox for data-driven policy making.”

California also is at the early stages of setting up a possible new regulatory sandbox, while Arizona went a step further in its reform efforts by getting rid of its Ethics Rule 5.4, which used to prevent legal services operations in that state from being owned or co-owned by nonlawyers.