Why Re-Regulation?
Reformers have identified the crisis in access to civil justice as a key justification for regulatory change. The best and most recent data on the civil justice system tell us that more than three-quarters of civil cases have at least one participant who is self-represented. This means that most parties facing debt suits or eviction or resolving property disputes do so without legal training or guidance.
Over the past few decades, the share of lawyers who serve ordinary individuals has shrunk, while the share of lawyers who serve corporations has grown. Data shows that most people who have legal problems never consider seeking legal help. It is clear that far too many people and businesses struggle to use the legal system or obtain legal services to solve problems because they don’t know where to find help, believe that they can’t afford legal services or find navigating the legal system too complex and time-consuming.
There is a growing consensus that the legal system is simply not working for the majority of our population. Those who advocate for legal regulatory reform assert that opening up the legal market to new investment, business models and providers will result in a greater range of legal services that are accessible and affordable for the many people and smaller businesses that are currently unserved or underserved. In particular, those advocating for reform are optimistic about the possibilities of leveraging technology to expand legal services delivery.
New Providers
One broad category of legal market reform seeks to authorize new types of legal service providers to provide limited legal services. This regulatory innovation is already being tested in Washington state, via the Limited License Legal Technician program (LLLT); in Utah, through the Licensed Paralegal Practitioner (LPP) program; and in Arizona, via the Lay Legal Advocates (LLA) program.
Proposals authorizing new legal service providers are analogous to tiered services in the medical context, where different medical services can be provided by professionals with varied levels of training and specialization. For example, nurses take vitals and administer medication, while nurse practitioners, who receive more training, can diagnose and treat many medical problems.
In Utah’s newly launched program, LPPs must have 1,500 hours of experience and either an associate’s degree in paralegal studies or a bachelor’s degree in any subject. They must also take LPP-specific online courses and pass a final exam. Utah’s LPP practice is limited to family law, landlord/tenant issues and small claims debt collection. As of December 2019, Utah has just four LPPs, but program administrators are optimistic the LPP market will continue to expand.
Arizona is currently piloting a program where domestic violence counselors can become licensed to provide limited legal advice. These new providers, LLAs, will receive approximately 64 hours of legal training that builds on counselors’ existing expertise in trauma and civil legal system navigation. LLAs are limited to assisting domestic violence survivors in four areas of service: advice regarding urgent civil legal needs at intake, advice during the completion of family law forms, advice regarding preparation for court and advice (but not advocacy) during court hearings.
Program designers argue LLAs will offer legal services to a population that typically does not receive legal services from attorneys; 86 percent of low-income survivors of domestic violence who seek civil legal services receive inadequate or no civil legal help. The Innovation for Justice program at The University of Arizona James E. Rogers College of Law, which created the LLA pilot, is also running a randomized, controlled experiment to measure outcomes.
Outside Investment and Nonlawyer Ownership
States examining regulatory reform are also considering changes to the Rules of Professional Conduct, like Model Rule 5.4, which limits law firm ownership and investment. In the face of the public’s increasing lack of access to affordable, appropriate legal services, some state supreme courts are examining whether restrictions on nonlawyer ownership and investment hinder the development of new legal service delivery models, particularly new ways of leveraging technology to provide services. Supporters of Rule 5.4 argue it protects clients and ensures lawyers’ independence, while some critics respond that Rule 5.4 and similar rules are thinly veiled forms of protectionist regulation designed to protect lawyers’ economic interests.
Reformers argue that relaxing or eliminating Rule 5.4 will spur innovation, and that new partnerships and investment opportunities will help lawyers and law firms invest in technology improvements and explore new business models, all with the goal of increasing efficiency, affordability and quality in legal services. For example, a firm that provides tax advice and retirement planning might also begin providing associated legal services. A lawyer-therapist partnership could bundle family law and counseling services. And technology companies could begin providing and scaling legal services delivery in collaboration with lawyers.
Utah is developing its regulatory sandbox where new legal service delivery models can be evaluated for safety and efficacy. California is also considering creating a regulatory sandbox. The sandbox model has been used to pilot new service delivery models in the financial sector for some time, but the concept is new in legal services regulation.
In Utah, normal rules would persist for most providers while interested parties can apply to take part in the sandbox and propose new ways of delivering services, even if the services would violate existing regulations. If admitted to the sandbox, participants would be authorized to operate under different regulations than the rest of the legal market. In Utah, entry to and participation in the sandbox will be monitored by a new regulatory entity that is still being developed. Ultimately, Utah reformers envision that new legal services delivery models proven to be viable in the sandbox will inform broader regulatory changes for the rest of the legal market.
Debating Reform
States considering reform face significant opposition from some lawyers and law firms, including some of the largest law firms in the United States.
When California initially proposed regulatory changes, the majority of public comments from lawyers were overwhelmingly opposed to most changes. However, supporters of reform note that those who submitted comments made up only a small minority of California lawyers. And, while the ABA recently adopted Resolution 115 encouraging states to explore regulatory reform, the proposal passed only after being stripped of its strongest language following strong protest from a handful of state bars.
Opponents of reform are particularly concerned about opening legal services to nonlawyer ownership and investment, arguing that such changes will allow profit motives to compromise lawyers’ loyalty to clients and independent judgment. The Big Four accounting firms moving into legal services delivery has been identified as one “threat” by those opposed to opening the legal market to new entrants. Opponents also argue that regulatory reform will not meaningfully move the needle on access to justice and might increase risk of harm to consumers. A related concern is that reform will produce lower-quality services and create a two-tier legal system split between high- and low-quality legal services. Some argue that alternative legal providers may lack sufficient training to provide appropriate legal services and may do more harm than good.
Reform advocates respond that these arguments reflect protectionist impulses and that re-regulated legal services will include safeguards for consumers. Arguments that profit motives will impede independent judgment ignore the fact that almost all law firms are currently “for profit” entities. Supporters of reform also note the current system already is a twotier system and that the bar for improvement is low considering that most citizens receive no assistance at all.
Reformers believe that those defending the status quo misinterpret or ignore the market forces that are already reshaping legal services today. Globalization and technology, they believe, have increased the demand for specialization and efficiency across all professions. They believe law is no exception. Regardless of changes in regulation, reform advocates argue that law firms will be forced to change to succeed in the changed legal marketplace and argue forward-thinking lawyers stand to benefit from regulatory reform because tiered services and outside investment will support development of new business models.
Evidence from other countries suggests worries about outsiders invading the legal market and causing harm to clients may be overblown. In 2007, England and Wales liberalized the legal system by allowing outside ownership of law firms. Traditional law firms have apparently not suffered, and regulators have seen no evidence of increased harm to consumers.
At the same time, it’s not clear that these reforms have led to increased access to justice for the public.
What the Future Holds
With several jurisdictions moving in the direction of changing legal marketplace rules and Utah already committed to testing innovative models via the regulatory sandbox, it is likely that reform of the legal market in some states is inevitable. While the U.K. experience suggests it could take decades to see meaningful changes in the broader market for legal services, researchers are poised to begin studying the effects of reform as new rules are finalized. As more states debate reform, advocates and critics alike will continue to make contradictory predictions about outcomes. An important aspect of Utah’s regulatory sandbox approach is that it will provide evidence rather than speculation.
With regulatory reform conversations occurring in more jurisdictions, lawyers and their law firms should monitor reform efforts, appreciate the changing legal market and prepare to take advantage of new opportunities. Lawyers are trained to predict the future by relying on precedents provided by court opinions. They should be open to the idea that we are approaching an unprecedented time of change in how many legal services are delivered.
