As States Toy With Reform, Legal Tech Cos. Fill Justice Gap

More than 100 legal technology companies have formed in the last 10 years to provide legal assistance to millions of Americans who can't afford an attorney, helping to bridge a gap in access to justice, while less than a handful of states have taken action to expand the practice of law.

According to the Legal Services Corporation's 2022 Justice Gap Study, low-income Americans do not get adequate legal help for 92% of their substantial civil legal problems and the cost of legal assistance is a barrier.

One way to lower the cost of legal assistance would be to open the practice of law to non-attorneys. However, according to the American Bar Association Center for Innovation's Legal Innovation Regulatory Survey, Utah and Minnesota are the only states experimenting with allowing non-attorneys to provide limited legal advice through regulatory reform programs.

David Engstrom, a Stanford Law School professor and a member of the California Bar's "Closing the Justice Gap Working Group," told Law360 Pulse in a recent interview that state bars and regulators are slow to implement regulatory reform because of inertia and protectionism.

"Welcoming new providers into the [legal] system threatens the bottom line … of lawyers," Engstrom said.

Utah became a legal innovation trailblazer during the COVID-19 pandemic in August 2020 when it launched a regulatory sandbox to expand the practice of law in the state. The sandbox permits entities to practice law that traditionally would not be allowed to under the state's legal rules. These include law firms owned by non-lawyers, companies employing attorneys to provide legal advice to consumers and technology platforms offering legal advice.

Meanwhile, Minnesota in March 2021 launched a statewide two-year pilot program that permits approved legal paraprofessionals to represent and advise clients in select housing and family court matters under the supervision of an attorney licensed in the state.

In the Southwest, Arizona has taken a different approach by formally changing its legal rules to authorize alternative business structures, such as law firms owned by non-attorneys, to practice in the state. Utah allows these entities to participate in its regulatory sandbox.

States that are considering similar regulatory reform to close the access to justice gap in the U.S. include California, Washington, Oregon, Nevada, New Mexico, Indiana, Connecticut and New York, according to the Legal Innovation Regulatory Survey.

Engstrom said that the legal industry is at a pivotal moment, with states considering ways to open up the space to innovation and technology capable of delivering law services.

"The question is whether all of this will come together in time and soon enough to help mitigate and remedy some of these really terrible access concerns at the state level," he said.

Many justice tech companies are not waiting for states to implement regulatory reform to close the access to justice gap in the U.S., startup founders and CEOs told Law360 Pulse.

Over the last 10 years, the justice tech market has grown from a handful of startups to a booming sector, according to a 2022 report titled "Justice Tech for All: How Technology Can Ethically Disrupt the U.S. Justice System" released by Village Capital and the American Family Insurance Institute for Corporate and Social Impact.

According to the report, investors have poured nearly $80 million into more than 100 early stage justice tech startups in about the last 10 years.

Recognizing the growth of the justice tech sector, four justice tech startup CEOs founded in December the Justice Technology Association, the first trade association dedicated to companies using technology to close the access to justice gap.

Attorney Camila Lopez, who is a co-founder and CEO of small claims court assistance provider People Clerk and a founding member of JTA, said that regulations in any space can inhibit companies from moving fast, but it is not the case that legal regulations are stopping businesses from innovating altogether.

"If innovation was being inhibited, then there wouldn't be a rise of justice tech companies," Lopez said.

Navigating existing legal regulations when trying to launch a justice tech company is tricky though, according to startup founders and CEOs.

Oftentimes, justice tech startup founders have to limit the services that they offer so that they don't violate states' rules against the unauthorized practice of law, they said.

Attorney Erin Levine, founder and CEO of online platform Hello Divorce and a founding member of JTA, said that she would like to hire attorneys who work for her company and offer legal advice to consumers, but that is prohibited in most states. Hello Divorce is a member of Utah's sandbox program.

Hello Divorce offers consumers in California, Colorado, New York, Texas and Utah tiered plans with prices that range from $99 to $3,600, according to its website. The company's most basic plan allows consumers to use their software to get all the paperwork needed to file for a divorce, and consumers can pay more money to get assistance from an attorney.

"The lawyers that work directly with consumers don't work for Hello Divorce … and that doesn't feel fair to those lawyers because they don't have an opportunity to get ownership interest in or stock in Hello Divorce," Levine said.

As the justice tech sector continues to grow, if states don't enact regulatory reform on their own, they may be forced to change by startups that challenge them in court, like consumer bankruptcy assistance nonprofit Upsolve Inc. did in New York.

In January, Upsolve hit New York Attorney General Letitia James with a federal lawsuit, challenging the state's ban on free legal advice from non-attorneys as unconstitutional.

A New York federal court issued a preliminary injunction in May allowing Upsolve to give legal advice to low-income debtors without fear of prosecution for practicing law without a license, ruling that the organization's activity is First Amendment-protected speech.

Sonja Ebron, co-founder and CEO of pro se litigants assistance platform Courtroom5 and a founding member of JTA, said that the Upsolve case proves that states are not implementing regulatory reform fast enough for legal tech companies.

"If states were moving fast enough, then they would've adopted already the First Amendment argument Upsolve used," Ebron said.

Upsolve declined to be interviewed for this story.

--Editing by Emily Kokoll.


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