Can Nonlawyers Close the Legal Services Gap?

Until recently, some form of ABA Model Rule of Professional Conduct 5.4, which addresses the professional independence of lawyers, applied to lawyers practicing in all 50 states. Key provisions of the rule include a general prohibition on lawyers sharing legal fees with nonlawyers, as well as the prohibition on lawyers forming partnerships with nonlawyers if any part of that partnership consists of the practice of law.

However, with a recent order from the Arizona Supreme Court, that state became the first to entirely eliminate its version of Model Rule 5.4. The change follows a similar opening of the profession to nonlawyers in Utah. Both states have enacted these broad regulatory changes in the name of access to justice.

Ethics Rules Amended

Previously, Rule 31 of the Rules of the Supreme Court of Arizona provided, among other things, that with certain limited exceptions, practicing law in the state required active membership in the Arizona State Bar. The Arizona Supreme Court’s August 27, 2020, order abrogated Rule 31 and replaced it with new Rules 31, 31.1, 31.2, and 31.3.

Among other changes, the updated rules eliminate the prohibitions on fee sharing and on nonlawyers having economic interests in law firms, and they create a new entity (alternative business structure or ABS). An ABS may include nonlawyers who have an economic interest or decision-making authority and may also employ lawyers to provide legal services to third parties. These entities must be licensed and must employ at least one active member in good standing of the State Bar who “supervises the practice of law[.]”

The Arizona Supreme Court further explained that under the new rules, nonlawyers (called legal paraprofessionals) will be allowed to “provide limited legal services to the public, including being able to go into court with their client.” Legal paraprofessionals will be “affiliate members” of the bar and therefore subject to regulation and discipline under the same rules governing attorneys. In addition, like attorneys, affiliate members will be required to disclose whether they are covered by professional liability insurance.