ABA Says Industry Regs Need A Rethink, But Will It Matter?

By Michele Gorman | February 18, 2020, 10:33 PM EST

The passage of a revised American Bar Association resolution intended to encourage a new look at legal industry regulation and increase access to justice represents a major step forward, even in the absence of any recommended changes on nonlawyer participation in the market, some experts say.

During the ABA Midyear Meeting in Austin, Texas, the 596-member House of Delegates overwhelmingly approved Resolution 115 by voice vote on Monday. The measure calls for "state regulators and bar associations to continue to explore regulatory innovations that have the potential to improve the accessibility, affordability and quality of civil legal services."

Before the vote, proponents made changes to address opposition from several state bars, making it clear that the resolution didn't wade into the divisive issue of giving nonlawyers an ownership stake in the profession.

Despite the changes, the resolution is still an important step for the industry, said Jordan Furlong, a legal market analyst and principal at Law21.

"You can really feel the tide turning in real time, and that's something that's unprecedented, at least in the recent history of the American legal profession," he said. "I don't think this ABA resolution is in itself a watershed. But it is of a piece with the general movement and momentum toward finally seriously reexamining and reconsidering the structure and impact of the regulation of legal services."

The issue of nonlawyer involvement in the market is hotly contested. The ABA has previously considered and rejected proposals to allow nonlawyers, including investigators and accountants, to own limited shares in firms.

Attorneys belonging to various state bar associations had raised concerns in a Jan. 30 letter about the ethical "minefield" that could result from the adoption of the original Resolution 115, which stemmed from the work of the ABA's Center for Innovation and aimed at opening the door to greater involvement of nonlawyers in the legal industry. Before the late changes, the proposal urged jurisdictions to adopt changes that could let nonlawyers perform services typically provided by licensed attorneys or even allow nonlawyers to own law firms.

The attorneys who signed the letter acknowledged that the resolution appeared to be an attempt to deal with a real lack of accessibility to justice for many people in the U.S. But they said a report attached to the resolution only focused on two ways of addressing the access to justice issue — nonlawyer firm ownership and loosening restrictions around who can provide legal services — and provided no evidence either would work.

While proponents say allowing in nonlawyers will support new, cheaper avenues for low- and middle-income people to find legal help, opponents predict it will undercut lawyer independence and drive down the quality of work.

A number of major state bar associations, including those in New York, New Jersey and Pennsylvania, have come out in opposition to nonlawyers rendering legal services, saying that encouraging nonlawyers to do the work of attorneys would put legal ethics in conflict with outside interests "motivated purely by profit."

In response to the vote Monday, Hank Greenberg, president of the New York State Bar Association, said his organization was "delighted by the adoption of Resolution 115, in its final form."

"We are grateful to the Center for Innovation for being responsive to our concerns and addressing them through substantial revisions to the resolution and its report," he said.

In a statement Tuesday, the New Jersey State Bar Association also praised the changes to the ABA resolution. And Pennsylvania Bar Association President Anne John said in an emailed statement to Law360 that the group will be watching other states' initiatives to determine their effectiveness.

Furlong predicted the passage of the resolution, even with the revisions, might sharpen the divisions between state bars and stakeholders.

"But at least we're having the debate, and at least we are continuing to move forward even while having the debate," he said.

Andrew Arruda, co-founder of ROSS Intelligence and a board member of the Institute for the Advancement of the American Legal System, agreed, saying he is excited the conversations around reregulation are at least taking place.

"I see this as the very first step to a longer process, with the end goal being a rethinking of how we are delivering legal services because it is clear that the current system is failing the vast majority of Americans," he said in an email.

Over the last decade or so, there has been a growing pool of data showing a massive and increasing gulf between low-income people with a need for help in civil matters and the number of people who can actually find and afford the help they need.

The profession has seen a spike in interest of late in opening the door to new "hybrid" business models and ethics rule changes meant to spur investment and drive down costs, particularly in housing court, child custody and health care matters. Studies by regulators and bar groups in California, Utah, the District of Columbia, Arizona and elsewhere are underway.

At least six states — Arizona, California, New Mexico, Oregon, Utah and Washington — have proposed or are adopting substantial regulatory innovations, according to the ABA.

In Utah, the state Supreme Court unanimously voted in August to pursue changes to its regulatory structure for legal services. In order to determine exactly what changes it will make in the long term, Utah is using a "regulatory sandbox" where, under the watchful eye of authorities, legal service providers propose and execute new business structures and methods of service delivery that are currently deemed illegal or unethical.

And California is making headway as the state bar considers proposals that could transform the way legal services are delivered and who delivers them.

The ABA resolution doesn't dictate to states which regulatory innovations to explore. That's up to the states to consider in light of their own values and needs, said Andrew Perlman, dean of Suffolk University Law School and a contributor to Resolution 115.

"We very intentionally did not take a position on what should be on the table or off the table," he said. "We have to see what works, and if there are new models that should emerge, we'll know that from what states actually consider."

Earlier this month, the Conference of Chief Justices, which represents state high court judges, also passed a resolution urging members to consider regulatory fixes aimed at closing the justice gap. 

It's not unusual for bar associations to endorse and support resolutions that call upon, say, judges or governments to act a certain way, Furlong said. While the ABA's resolution doesn't have controlling authority, it has persuasive power.

"But that having been said, the ABA has never used its persuasive power in this matter or on this subject before, and I think that's significant," he said.

He added that Monday's outcome signals to jurisdictions that the ABA isn't opposed to regulatory innovation — and actually supports it.

Experts said they hope the vote will continue the debate on reregulation in the legal industry.

"Once 10 or so states do it and you have a sense of how to do it and what works and what doesn't work, then other states will follow along," said Rebecca Sandefur, a professor at Arizona State University and faculty fellow at the American Bar Foundation, where she created the Access to Justice Research Initiative.

"This is neither the end of this or necessarily a victory for it," she said. "It's one step in the profession I think doing some fairly serious reconsideration about its role in providing access to justice and access to legal services."

--Additional reporting by Andrew Strickler, Mike LaSusa and Aebra Coe. Editing by Jill Coffey and Emily Kokoll.

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