Anne-Marie Rábago recently joined the State Bar of Texas as Director of the Texas Opportunity & Justice Incubator in Austin. At the time of this interview, she served as Director of the Access to Law Incubator and an Adjunct Professor of Tax at California Western School of Law in San Diego. She is a former Chair of the Young Lawyers Forum. We interviewed her at the Joint Fall Meeting in Boston to talk about the incubator movement and the access to justice gap.
Q How did you get involved in the Section?
A I entered the LL.M. Division of the Law Student Tax Challenge back in the fall of 2007, and I ended up being one of the finalists invited to Henderson, Nevada for the Midyear Meeting.
Q Lake Las Vegas.
A Lake Las Vegas! My partner and I competed. We were the first—and at that meeting, the only team from Northwestern—to compete. And I think we went up against three teams from Denver, who were fairly consistently at the top of the LL.M. Division competition up to that point. Gary Scanlon and I won first place, and we both have been pretty involved with the Section ever since. Northwestern loves to have their LL.M.s compete and generally ends up with a team or two in the finals. And they really enjoy that legacy. At this point, they sponsor different events, different Section meetings each year.
Q So after the LL.M., you graduated. Tell me what you did for practice after you left the LL.M. program.
A My husband and I decided that we wanted to return to Dallas, Texas, which is where we had met and lived previously. I applied for positions in Dallas and ended up working for PwC in their International Tax Services as a Senior Associate. They were a pretty heavy CPA practice group there in Dallas, and since I was the only lawyer on the team I got all of the meaty research and writing jobs. Actually, it was fascinating work. Intellectually, it was really interesting: the clients they had and the work that they were doing, including lots of restructuring projects, headquarters studies, transfer pricing, and so forth.
But a few things happened simultaneously. One was that my husband and I realized we had been a little too hasty wanting to go back to Dallas. We agreed one morning that we wanted to return to San Diego, which is where we had lived early in our relationship, and where I had gone to law school. He also wanted to change careers and go back to school. This was very early 2009, and the economy was really just in the tank. I went to the leadership at PwC and asked if there was any way that I could get to San Diego with PwC. My partner called and the practice group there said that they actually had been reducing their size in San Diego and recently had to send some managers and seniors to Los Angeles in order for them to be able to keep jobs, so there wasn’t any place for me.
That was okay because when I thought about what I was doing from a work perspective—this sounds so hokey—but the reason I went to law school was because I wanted to help people. The work I was doing with the accounting firm didn’t have a clear line of sight for me relative to how I was helping people with my knowledge and my time and my work. So I decided that if we were going back to San Diego, I was going to start my own practice, and I was going to really be able to see the impact that I was making with individuals and small businesses.
Of course, there was this little bar exam—the California bar exam—that I had to pass and get out of the way before I could actually hang my shingle out. Although I guess I probably could have practiced federal tax. But in California, most people with federal tax issues come with state issues at the same time.
Q So you got the bar out of the way, and then hung out your shingle. How did that go, in the depths of the recession?
A Actually, there was plenty of business. It was just a matter of getting out and letting people know that you existed, so they would start sending clients your way. As an attorney, everyone just assumes you know all laws, all things about all laws. I built this pretty significant referral network of other attorneys that do not practice tax law (as well as some that did) who are friends and colleagues. We’d refer work to each other. Non-tax attorneys, you know, were really the bread and butter of my business in terms of referrals.
Q And how about the Section? You stayed connected with the Section through all this?
A Yes. Initially, I was asked to do some panels. Kelley Miller invited me to do a Tax Bridge to Practice panel about solo practice. So I did that. Then the next year I came back and did another Tax Bridge panel on social media and tax practice. I had been involved with the Law Student Tax Challenge, so I was on the Marketing Committee for the Law Student Tax Challenge, then the Written Round Judging Committee. Then I served as the Chair of the Written Round Committee and then I was Co-Chair of the Law Student Tax Challenge. Two years of that. And then at the same time, Melissa Wiley and Ivan Golden invited me to be a Vice Chair of the Young Lawyers Forum (YLF).
Q Let me ask about the connection, if any, between the Section and what you were doing in terms of getting your practice off the ground.
A Well, when you’re a solo practitioner, it becomes important to establish your credibility. I always felt that my involvement with the Section and speaking on panels were things that I would put into online profiles and my resume. I’d talk about my involvement. It’s a national organization; so, as a tax attorney, I feel like it lends credibility. My involvement with the Section says this person takes their continuing education seriously. Being a speaker helps to establish expertise. In my role now, I try to get my new attorneys to get involved in speaking opportunities as early and as quickly as possible because it’s just another point of social proof, which is what we call it in the marketing world. Other people listen to this person, so maybe I should listen to this person as well.
Q So what is your current role?
A After almost six years of running my solo practice, I was invited to take over the reins of a solo practice incubator program at my alma mater, California Western School of Law, which is an ABA-accredited school in downtown San Diego. Our program was founded by a visiting professor in 2012. At that time the incubator program at California Western was the very first incubator in California, the very first legal incubator on the West Coast, and about the fifth or sixth program in the entire country.
Q What is an incubator?
A The incubator movement—we consider it a movement—was born out of a triple need in the legal industry. One, we still have issues with new lawyers who graduate from law school but find there are no job opportunities for them. They face the decision of “do I practice law at all?” or “do I have to go and do something outside of law?” Second, as lawyers, we can hang out a shingle immediately and try to make a go of having our own law practices. But the challenge with doing that is many young lawyers don’t know how to own a business, and they don’t have the first idea of how to get a client. And maybe they know how to service their clients’ legal needs, but they are not even 100% confident that they know that either. And then third, inside of the incubator movement we see a significant access to justice gap.
Q What is the access to justice gap?
A We have legal service organizations who take government funding and, because of that, the government generally requires that the clients served by these legal service organizations meet certain income guidelines or caps on how much the clients that they serve make for a living. Market attorney rates, which in San Diego average $300 an hour, are expensive. That leaves a significant chunk of the population who either determine attorneys are unaffordable or who go to legal aid and are turned away—or both. These people may feel the law is not something that is there to serve or protect them.
And so one of the things we teach attorneys in these incubator programs across the country are alternative legal service delivery models, concepts of unbundled services, something other than full representation. Some of the programs out there use a sliding fee scale, based on income. People who do this often just publish the scale. If your household has this many people, your income is within this range, our hourly rate will be $X per hour. The hourly rates are generally significantly below market, and depend on what the client can afford.
Q And so how’s the incubator program going in San Diego?
A It’s going well! I have 14 attorneys in my program. The program lasts anywhere from 12 to 24 months, the idea being they come into the program, they make use of the tools and the training, and then they fly free from the nest with sustainable practices that they can continue to use to build and fend for themselves. One of the ways we make this possible for young attorneys is that the program provides them with tools, training, and also the ability to launch their practices with extremely low overhead. There are more than 60 programs like this across the country now.
I have 14 attorneys in two spaces in downtown San Diego, both in class A office buildings. My attorneys share a room. They each have an individual desk in that room, with a file drawer and chair. And they bring in their own equipment, technology, printers, computers, etc. Their desk costs $250, $300 a month, depending on the location. Other than the law license, the only other financial outlay they’re required to have is malpractice insurance. The only financial outlay they’re required to make other than for the law license is for malpractice insurance. In California we have a wonderful insurance company: for a new solo, the first year’s insurance rates are $500 for the whole year.
Q That’s great!
A And you can finance that and it ends up being about $50 a month. But even at that $300 to $350 a month overhead outlay, there are young attorneys who will say, “I can’t. I can’t spend that without knowing that something’s coming through the door because in addition to overhead, I also have my rent, my meals, my family.” So it’s a significant hurdle, even with that low overhead price tag and being able to get the support and training needed to start their own practices. It takes a pretty big leap of confidence to come into an incubator program.
Q What’s the typical exit strategy? Is there any kind of pattern that you see with attorneys leaving incubator programs?
A Well, by nature they’re designed with a consistent flow of attorneys coming in and leaving. Most programs run no more than two years, to allow their attorneys to get all of their ducks in a row and feel also that they’re ready to go out into the market.
Q What other benefits do incubators provide?
A While they’re in the program, attorneys receive LexisNexis Advance for free. While they’re in the program they receive CLIO Practice Management software free. They get access to free CLEs from all kinds of different angles. In California we have Continuing Education of the Bar (CEB), which is a joint continuing education program of the University of California and the State Bar of California. There’s also PLI, which is the Practical Law Institute. A number of these national organizations and vendors have come on board to say you’re doing good things for the community and we’re going to reward that by helping to underwrite, if you will, your ability to start this law practice. Because the idea is that, in some capacity, they’ll continue to serve this market with affordable legal services now that they understand how to do that.
Q But does that happen, in your experience? Do your alumni continue to serve the affordable legal services market?
A My program, as I said, has been around since 2012. At this point I have about 30 graduates, alumni of the program, and I had to pull these statistics together this past March for a survey, which the ABA Standing Committee on the Delivery of Legal Services organization put together. They surveyed all of the incubators across the country. They had about 46 of us that actually fully responded to the surveys. One of the things they asked about is “Do you have graduates of your program? If so, what are they doing now?” So I have about 30 graduates. What I gleaned from looking into all of them is that about half have stayed in their solo practices. That is, there are about 15 of them who used the program to launch their solo practices and still do the work that they did while they were in the incubators. Now, they probably have a little bit more of a mix of full service, full price clients, but they still have a commitment to pro bono work and to serving the access to justice gap. The ones who didn’t stay in solo practice, from my perspective, I don’t see as a failure of the program. I think that any time that you have an opportunity to try something you think you might want to do but you learn that actually you do not want to do, that’s a win from a career perspective.
The ABA Standing Committee on Delivery of Legal Services is very involved with the incubator movement across the country, and it has provided us with a lot of support services and helped to build bridges between the programs. We’re all out here doing similar things, so the committee helps us figure out how can we can take tools and share those resources amongst ourselves.
Q So let’s talk a little bit more about this access to justice gap and whether or not you think the incubator program is making a dent in your community and nationwide.
A Honestly, I walk away from my office every day thinking, what more can we do? How can we bridge this gap? Because it’s overwhelming. And I think that we are starting to chip away at the problem, and it’s progress, but it’s not enough. It’s not enough.
Q What more do you think tax attorneys could do?
A Well, one, I don’t think most tax attorneys are doing any of this. I don’t have any tax attorneys in my incubator. We just held a panel yesterday and so I put out a call on this (we have a listserv of people who lead incubators) to say, “Does anybody have a tax attorney in their incubator program?” So my panel had a gentleman who runs a program here in Boston and he said, “You know, we do get clients who call, but not a whole lot, for tax.”
And so I think that just an awareness among tax attorneys that this is something they could do would help. I know from my own practice that the access to justice gap exists in tax law. It exists both from the side of planning as well as, maybe more severely, on the side of controversy. And our low-income taxpayer clinics are wonderful. I volunteer for one in San Diego. These programs have been around a while, but they, too, are subject to income restrictions. I think the grant they receive from the IRS says that 90% of the clients they serve must fall within 250% of the federal poverty guidelines. That’s a very low threshold.
When I was practicing, I would have clients call whose income suggested that they really couldn’t afford what I would like to charge them. I would say “Call Legal Aid and the University of San Diego LITC as well. Call those two programs. Do their intake, see if they will take you as a client with your income and your needs.” And invariably they’d call me back and say, “No, I don’t qualify.” Then, as a practitioner trying to run my practice, I had to make that call. Was I going to help this person who obviously had a need and do it at some lower rate or some really stretched out payment plan? But I wasn’t trained on how to build a practice that offers limited scope services, sliding scale fees. So that’s valuable training we provide for these attorneys that are in these programs, in addition to the low overhead.
Often I would take the cases and then run into a client collection problem. And it’s hard. It’s a significant challenge when you’re in private practice, trying to make a living yourself. It’s no wonder that taxpayers, in general, just believe that representation before the tax agencies isn’t something that’s within their grasp.
Judge Holmes was in San Diego and talked to the Tax Section of the San Diego County Bar Association in May. He told us that 90% of the S cases and 60% of regular cases are filed by taxpayers pro se, representing themselves, for something like a total of 14,000 cases last year. Based on what the Tax Court had studied, most tax attorneys would require a $7,500 to $10,000 retainer in order to even begin to crack open a case that was worth $50,000 to the taxpayer. So you spend $7,500 to $10,000 in order to fight a potential $50,000 tax deficiency. Do the math on that; it doesn’t make sense.
So it has to come from outreach and awareness for the taxpayers that there may be alternatives that are affordable for them, and then we have to build alternatives that are affordable for the taxpayers. I think there probably are more tax attorneys out there that would be interested in doing this than anybody’s aware of.
Q Do you have a plan, a way to connect tax lawyers in general with incubators or with clinics?
A It’s hard. I think conversations like this and panels like the one yesterday are a place to start. Reaching out to LL.M. programs and the law schools that have more significant tax offerings in their J.D. programs is also important. There’s a movement for nonprofit law firms as well.
Q Is there such a thing as a nonprofit law firm?
A Oh, yes, those exist. The one that is most recognized in this country is in Utah. It’s called Open Legal Services. Their website is: openlegalservices.org. They’re a 501(c)(3) organization, and their founders are attorney employees. Unless they’ve changed this recently, they only do family law and criminal law. These are all just models, innovative ways of trying to disrupt the system, the legal industry, as it has always existed and as it stands. But the nonprofit law firm model is one that could be taken and, I think, applied to most any practice area. Not all, but many.
Q There’s no reason why it couldn’t be applied to tax.
A I think there’s huge need and opportunity. It’s just going to take some awareness and some people taking the reins and building it. As I said, I’ve only been in this role for the last year and a half, so I’ve just been absorbing everything I’ve heard and trying to learn as much as I can. And, you know, I’d be open to conversations and help in trying to build something.
Q What can Section members do to help you out?
A Right now, I’d recommend visiting the Lawyer Incubator Directory on the ABA Standing Committee on the Delivery of Legal Services webpage (http://www.americanbar.org/groups/delivery_legal_services/initiatives_awards/program_main/program_directory.html) to locate a program in your area. Consider sending low-income and modest-means referrals to your local incubator lawyers and volunteering as a mentor for young attorneys in your local incubator program.
As I look toward the future, I believe it’s important that we continue to have these conversations. It would be great to get people on board who understand, are sympathetic, and see this access to justice need. Then, let’s see what kinds of programs we can create in the tax law community to address the need. ■