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Rocket Lawyer Seeks Non-Lawyer Firm Ownership Test in Arizona

May 19, 2021, 6:04 PM

Rocket Lawyer, which is testing non-lawyer ownership of legal services in Utah, has applied to join Arizona’s experiment, making it the first company to study the new approach in both states.

Rocket Lawyer submitted an application to become an “alternative business structure,” said Suzanne Porter, manager of legal service programs for the Arizona Supreme Court. Such legal services, not owned by lawyers, are allowed in the state after the court scrapped a rule that prohibited such arrangements.

Rocket Lawyer in September became the first big-name legal services provider to announce that it was taking part in Utah’s then-two-year pilot sandbox program. The Utah Supreme Court recently tacked on another five years to the effort, designed to collect data and test legal businesses with new ownership models.

Deregulation in Arizona, and the regulatory sandbox experiment in Utah, allow legal services companies to innovate without fearing they’re gong to be sued for unauthorized practice of law, said Charley Moore, Rocket Lawyer’s founder and CEO.

Moore said Rocket Lawyer plans to offer in Arizona the work it has been doing in Utah and in the U.K., where the company has operated since 2012. Rocket Lawyer through its online platform helps people design wills, leases, and other legal documents, and it assists small business with contract formation and e-signatures.

“We plan to fully participate in Arizona, building on our experience and continuing to refine our operational model to lower the cost of hiring an attorney,” Moore said in a written statement.

Companies like Rocket Lawyer have been “anticipating and waiting for this moment,” said Marcie Borgal Shunk, president of the Tilt Institute, a law firm consultancy, in a statement.

“Operating in these states opens up a wide range of possibilities for any company looking to compete for traditional legal work—and to do so with the benefit of potential large-scale capital investment to propel rapid growth,” she said. “Rocket Lawyer is no exception.”

The Cutting Edge

Arizona and Utah have been on the cutting edge of states seeking to loosen or repeal their law firm ownership rules. Advocates of legal regulation changes say the overhaul is needed to increase access to legal services for those unable to afford lawyers.

California is formally weighing whether to approve a new regulatory sandbox similar to Utah’s, and several other states also are studying the issue.

Last August, Arizona went further than Utah by eliminating ethics rule 5.4, which had barred nonlawyers from having an economic interest in law firms or other legal service operations. That change was accompanied by a framework to license new “alternative business structures” that take advantage of the rule change. The new process also included measures designed to protect the public.

The court simultaneously instituted a new process to allow nonlawyers, called “legal paraprofessionals,” to provide limited legal services, including going into court with clients.

Since then, the Arizona Supreme Court has approved three entities to become alternative business structures. Another nine, including Rocket Lawyer, have submitted applications to take part, Porter said. About 150 people have registered to take the test to become a paraprofessional, which is still being developed, she said.

Historically, it’s been up to tech-savvy alternative legal service providers like Rocket Lawyer to demonstrate the benefits of legal industry deregulation, said Clifford Winston, a senior fellow in economic studies with the Brookings Institution.

“They do the things that traditional lawyers do, but charge much less,” Winston said.

This has been especially important in the legal field, which time and again has been reluctant to embrace change, even when it’s clear that consumers will benefit, said Winston, co-author of the new book, “Trouble at the Bar: An Economics Perspective on the Legal Profession and the Case for Fundamental Reform.”

In the U.K. and Utah, Rocket Lawyer is allowed to have attorneys on staff—as regular employees—who can work with the company’s digital tools “in a much more integrated way” than its existing network of independent attorneys have been able to, Moore said.

“In Utah, this allows us to be the first point of contact for simple matters, while also creating opportunities for our network attorneys when more complex matters arise,” he said.

Rocket Lawyer on April 21 announced it had raised “a major growth capital financing” round of $223 million. The funding will be key, Moore said, as the company looks to scale its cloud platform, which will enable customers to more easily get attorney advice, and to make and sign natively digital legal documents.

To contact the reporter on this story: Sam Skolnik in Washington at sskolnik@bloomberglaw.com

To contact the editors responsible for this story: Chris Opfer at copfer@bloomberglaw.com; John Hughes in Washington at jhughes@bloombergindustry.com

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