Proposed changes to law firm ownership rules in several states have set the stage for a fierce debate at an upcoming American Bar Association conference that could open the door to new models for legal practice in the U.S.
Passage of Resolution 115 by the ABA likely would add momentum to the burgeoning, but still mainly regional, access to justice movement that’s so far centered around several state bar proposals. The resolution is up for a vote Feb. 17 in the House of Delegates at the ABA Midyear Meeting in Austin, Texas.
The resolution before the policy making body encourages jurisdictions to consider “innovative approaches” toward increasing access to justice, while also ensuring ethics protections aren’t diminished and data is collected on the outcome of this work. The measure was put forth by the ABA’s Center for Innovation and four ABA committees.
Opposition to the resolution’s approach has been amplified, including claims the proposal doesn’t provide enough protections for legal clients and would allow nonlawyers and other third-party investors too much sway. The debate will pit these opponents against numerous advocates who already back the resolution.
The resolution was introduced following proposed changes to bar rules in California, Utah, and Arizona, including the possible loosening or repeal of Rule 5.4 in those states. That rule prevents lawyers from sharing fees with nonlawyers in most circumstances.
Although the ABA has resisted calls for law firm ownership reforms in years past, Resolution 115 may have arrived at an auspicious moment.
“Now, the urgency to deliver legal services is becoming irresistible,” Texas Supreme Court Chief Justice Nathan Hecht said. “In the last ten years, there’s been this drumbeat that things just aren’t where they need to be.”
Other attempts at the ABA level to modify law firm ownership rules were unsuccessful in 1999 and 2011.
Resolution 115 is more modest in scope than the earlier ABA proposals and doesn’t recommend specific rule changes. Because of this, and because of the momentum that’s been building for change at the state bar level, the vote could be a close one.
The market has also evolved since the earlier proposals. More tech-fueled legal services and alternative legal service providers have emerged and the Big Four accountancies—KPMG, EY, Deloitte, and PwC—have made inroads into the legal services space.
These players don’t often weigh in directly on the issue of law firm ownership, but they stand to benefit from any rule changes allowing nonlawyer participation.
In the run-up to the debate, interests on both sides of the issue have lobbied the delegate group behind the scenes.
One of the highest profile public objections to the measure came via a Jan. 30 letter to the ABA governing body from a group that included state bar presidents from New York, New Jersey, Ohio, Pennsylvania, Delaware, and Illinois.
The resolution risks eroding the industry’s “critical values,” the letter said.
“Our highest priority ought to be advancing the profession’s duty to preserve uncompromised loyalty to our clients’ interests,” the group wrote. “Outside ownership of legal providers would present a minefield for the profession by creating a dangerous tension between maintaining legal ethics and satisfying outside interests that are often motivated purely by profit.”
Pennsylvania Bar Association President Anne John, said she agreed to sign the letter because of what she sees as the need to maintain lawyer independence.
John said access to justice is important to her, but it makes more sense to handle the problem through increased legal aid and improved pro bono efforts, as opposed to more aggressive regulatory changes.
Strict legal ethics codes are “centuries-old” legal traditions that shouldn’t be tampered with, said John. “It’s a sense of confidentiality and trust and protection,” she said.
The 12-page report attached to the resolution was in part based on a faulty assumption, said one of the authors of the letter, Stephen Younger, that changing law firm ownership rules will have a direct impact on access to justice.
Younger, a state delegate to the ABA from New York, said the report “is written as a polemic for nonlawyer ownership.”