Several jurisdictions in the United States, Canada and elsewhere are exploring legal services innovation with regulatory sandboxes. This month we interview well-known legal futurist Jordan Furlong for his insights on what lawyers can learn from these sandboxes.
Law Practice: For readers who aren’t familiar with regulatory sandboxes, can you explain what they are and what they mean for a lawyer in practice today?
Jordan Furlong: A regulatory sandbox is basically a safe space where nontraditional or innovative services can be offered outside of usual regulatory or licensing restrictions. A forward-looking regulator, recognizing the benefits that innovative services could offer, doesn’t want to ban them outright. But nor does it feel it can simply green-light new types of services that violate its established licensing and ethics standards. So, the regulator chooses a middle way: It creates a “sandbox” where the service can be tried out under supervision and without the usual regulatory restrictions, to see whether the benefits it provides outweigh the risks or harms it creates.
While many lawyers are concerned that legal sandboxes will foster direct competitors, in most cases the innovative services that sandboxes are meant to encourage are aimed squarely at the vast population of people who can’t afford to hire a lawyer, or who can’t find a lawyer willing to help them with their problem for the fees that problem can command. Practicing lawyers should follow sandbox developments (currently planned or underway in Utah, British Columbia, Ontario and possibly California) to see what the innovations in legal services they may generate.
Although you never know—the tools and advances that emerge from these sandboxes might well help lawyers make their own practices more efficient and effective down the road. And they might yet lead to something more transformative than that.
LP: How do these sandboxes differ from past attempts to liberalize the legal services marketplace?
Furlong: Previous efforts to liberalize the legal services sector have been “top-down”—a regulator creates and authorizes a specific new type of provider and carves out a narrow exception to traditional prohibitions against “nonlawyer” provision or fee-sharing. The Limited License Legal Technician (LLLT) in the state of Washington was a good example, especially because that program’s origins—a bitter fight between reformers and protectionists that wound up placing far too many restrictions on the LLLT’s scope and viability—led directly to its demise last year.
By contrast, the new wave of legal reform is “grassroots” or “bottom-up.” Rather than carving out exceptions and trying to pick winners based on their own limited knowledge (and hobbled by political influences), smart regulators are inviting legal innovators of all stripes to come tell the regulator what they think will work, based on their own research and experiences.
This makes all kinds of sense. Regulators, as a general rule, are focused on what might go wrong with a particular type of legal services delivery, and so their default approach is to see every new proposal in a negative light. Entrepreneurs and innovators, on the other hand, are focused on what could go right, and they will only invest their time and money in opportunities that they believe will reward their efforts. Whether lawyers or not, these are the people who should be developing new legal services models.
LP: Who do you think the sandbox participants will be? Lawyers or law firms? Tech companies? Lawyers partnering with tech companies?
Furlong: All of these and more. The first five applicants to be approved by Utah’s regulatory sandbox were:
1. 1Law—a company that planned to provide no- or low-cost legal services to help clients complete court documents, and to offer legal advice using lawyers, nonlawyers and technology.
2. Blue Bee Bankruptcy Law—a Utah sole practitioner who wished to give his paralegal employee a 10 percent ownership interest in the firm.
3. LawHQ—a mass tort litigation firm that planned to offer equity ownership to some of the software developers it employs.
4. LawPal—an entity that aimed to provide a TurboTax-like platform to generate legal documents in divorce and custody, eviction and property seizure cases.
5. Rocket Lawyer—a nationwide online platform that helps consumers create legal documents and connects them with a network of independent attorneys.
More recently, Utah approved the application of Law on Call, which bills itself as the country’s “first nonlawyer-owned law firm.” It charges $9 per month for unlimited access to lawyers who can offer advice over the phone on business law, contracts, employment, housing and real estate, and end-of-life planning. If legal work is needed, rates start at $100 per hour.
It’s unlikely that Utah’s regulator, if tasked with creating an “innovative legal service,” would have come up with all these entities on its own.
LP: The sandboxes we’ve seen thus far are at the state or provincial levels; do you see them impacting federal practice areas such as bankruptcy, intellectual property or immigration?
Furlong: It would actually make more sense for legal entrepreneurs to pursue innovative solutions in these practice areas, because the markets are much larger and have many fewer variations among jurisdictions. In fact, one of the most intriguing and successful new providers in the legal innovation space is Upsolve, a free nonprofit tool that helps people generate Chapter 7 bankruptcy forms and relieve their debt. Immigration is an area of law that disproportionately impacts people from racialized minorities and with low incomes, who would also benefit immensely from new service delivery models.
LP: When will lawyers begin to feel the impact of the innovations promised by regulatory sandboxes? Does it matter the size of practice or area of law?
Furlong: Lawyers might never feel the impact of regulatory sandboxes, and that’s totally fine. As is the case with many things happening in the legal sector, this isn’t about lawyers. Most studies suggest that more than 80 percent of legal issues or problems never make it to a lawyer. And it’s very possible, even likely, that most of these issues and problems don’t require a lawyer. They require simpler, faster, less expensive legal solutions. That’s what sandboxes are intended to provide.
The legal profession needs to understand the importance of this point. We have made the legal services market all about us—to our advantage and to everyone else’s detriment despite the fact we claim this as “consumer protection.” Lawyers have essentially declared to the world: “You may hire us, and only us, to solve your legal problem. If you can’t afford to hire us, you may hire nobody else to help you. You may use no other paid service to assist you.” Consumers who cannot afford help are left to figure it out on their own, or get a friend or family member to help, seek charitable services or else learn to live with the problem.
Rohan Pavuluri, the CEO of Upsolve, has characterized the access to justice failure as a civil rights issue that his company intends to fight like one. Upsolve’s tagline is “Civil rights should be free.” It should be a grave concern to the legal profession that we are being reframed as civil rights opponents who unfairly sustain their own privileges at everyone else’s expense—not only because the reframing could succeed, but because Pavuluri has a point.
A significant percentage of lawyers would consider regulatory sandboxes a threat to their livelihoods. But many people outside the profession (and a growing number inside it) believe sandboxes don’t go nearly far enough—that the correct path forward has been taken by Arizona, which completely eliminated the ethics rule that prevented nonlawyers from having an economic interest in a law firm or participating in fee-sharing. Arizona’s regulators decided that these rules were stifling access to justice.
At the end of the day the profession shouldn’t focus a debate on how far regulatory sandboxes should go. Rather we should take a good, hard look at why regulatory sandboxes are even necessary, and understand the changes and opportunities they may bring.
LP: Thanks for your insights, Jordan.
In an upcoming column, we will be interviewing some other noted legal commentators for further perspectives on regulatory sandboxes.