Change is Going to Come: Legal Services and Regulatory Reform

legal servicesAt the request of Dan Linna, Director of Law and Technology Initiatives at Northwestern Pritzker School of Law, Dan Rodriguez (also of Northwestern) and I facilitated the October meetup of Northwestern’s Chicago Law and Technology Initiative. The group brings together Chicagoans to explore legal innovation, how technology can improve legal services/access to justice and legal startups.

We designed the meetup as a discussion on regulatory reform with perspectives from tech entrepreneurs, law firm legal ops personnel and participants who may not be licensed practicing lawyers. Specifically, we wanted to engage their viewpoints on whether some of the Rules of Professional Conduct may be barriers to innovation in the legal field and contributing to the access to justice gap.

Exploring the Rules and Innovation

We opened the meetup with a short presentation on Rules that may be triggered by products or services developed in the legal tech industry. Operators in this space know they can’t run afoul of the Rule against the unauthorized practice of law (UPL) (Model Rule of Professional Conduct 5.5), which exists in virtually every state. The rule against UPL is designed to protect the public from incompetent lawyers delivering incompetent legal services. It also applies to those who haven’t received a law license, as well as owners of tech companies that may develop products or employ methods that bar regulators interpret as engaging in UPL.

In addition, certain ABA Model Rules restrict the ways that lawyers market their services. Model Rule 7.2 prohibits a lawyer from “compensating, giving or promising anything of value” to a person for recommending the lawyer’s services, unless it’s to pay the usual charges of a legal service plan or non-profit lawyer referral service. This Rule has been criticized for driving for-profit platforms out of business (e.g., Avvo). It has also been critiqued for depriving would-be customers from legal services, and preventing lawyers from scaling their practices to reach potential customers in distant locations.

Ground zero in the regulatory reform movement is Model Rule 5.4, which has been adopted in most U.S. jurisdictions. The Rule is titled “Professional Independence of a Lawyer,” but most of its provisions prescribe the economics of a lawyer rather than the ethics of their behavior. For example, the Rule prohibits a lawyer or law firm from sharing legal fees with nonlawyers and from forming partnerships with nonlawyers if any activities consist of the practice of law. It also prohibits lawyers from practicing in a professional corporation or association if a nonlawyer has an ownership interest or is a corporate director of officer. These provisions are apparently based on assumptions that affiliating with nonlawyers would negatively impact the professional independence of a lawyer.

Rules 1.7, 1.8 and 2.1 address the requirement of independent professional judgment. Therefore, some argue that there’s no valid regulatory purpose for Rule 5.4’s prohibitions.

Update on State and National Task Forces

Next, we outlined efforts underway by state task forces and national organizations to modify some of the Rules. Rodriguez then shared the conclusions of Bill Henderson’s watershed Legal Market Landscape Report, which was the impetus for the formation of task forces in various states. He discussed recommendations from task forces in California, Arizona and Utah, and shared the work of the Association of Professional Responsibility Lawyers and the Institute for the Advancement of the American Legal System. Both organizations are studying the issue to formulate recommendations that can be adopted broadly by state supreme courts. I added that Illinois would soon be entering the re-regulation dialogue through  the Chicago Bar Association/Chicago Bar Foundation Task Force on the Sustainable Practice of Law and Innovation, which kicked off on October 7.

While the task forces are at different stages, they seem to be formulating fairly diverse recommendations. However, a consistent theme is that certain Rules (including Rule 7.2 and 5.4) are unintentionally contributing to 70-80% of Americans whose civil legal needs aren’t being met.

Engaging in Small Group Discussions

After presentations from Rodriguez and myself, we split attendees into small groups for a more intimate discussion. The groups reflected the diversity of roles present at the meetup: lawyers in firms, lawyers in legal ops, tech entrepreneurs and law school and computer science faculty and students. A facilitator led each group through questions related to how the Rules impact the profession. After the small group discussions, participants returned to the main room and shared their thoughts.

As expected, the comments didn’t stay within the lanes of each question. But the conversations were robust, with participants offering perspectives from disparate experiences across industries and geographies. I share the discussion questions here in case you’d like to use them in a focus group or CLE:

  1. Will changing the rules affect access to justice/the delivery of legal services? How or how not?
  2. Has the proscription against lawyers sharing fees with “non-lawyers” impeded projects, work and innovation in your legal space? Please share specific examples.
  3. What could be the benefits if the ethical rules were changed to allow the sharing of fees between lawyers and others? Possible downsides?
  4. What benefits would you expect if lawyers were allowed to partner with (or form a P.C. or for-profit association) other types of professionals in the delivery of legal services? What could be the downsides? Please share specific examples.
  5. A main principle underlying regulation is protection of the public.
  6. How do we obtain input on the need or desire for protection from would-be or current customers?
  7. Do members of the public know that lawyers aren’t allowed to pay for referrals, share fees with or go into business with other professionals? Do they care?
  8. If regulations were eased, how might legal services consumers be impacted in the short-term and long-term?

Engaging in Others in Change

It’s clear that the path we’re on isn’t conducive to the delivery of efficient civil legal services to Americans who could benefit. And this path isn’t providing for the sustainability of law practices either. However, as we witnessed at the meetup, a venue that considers the perspectives of lawyers, technologists, entrepreneurs, project managers and computer scientists just may develop a roadmap for a better future.

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Jayne Reardon
As a prior trial lawyer, Jayne leads lawyers to embrace the transformative possibilities of future law practice. As a prior disciplinary counsel, Jayne is passionate about promoting the core values of the legal profession. She is a graduate of the University of Michigan Law School and the University of Notre Dame. Jayne lives in Park Ridge, Illinois with her husband and those of her four children who are not otherwise living in college towns and beyond.
Jayne Reardon

3 thoughts on “Change is Going to Come: Legal Services and Regulatory Reform

  1. Allowing websites to be paid for referrals is bad for lawyers and bad for clients. As it is, certain web sites dominate internet searches. If someone looks for a lawyer online they are increasingly likely to find some sort of marketing service rather than a lawyer whose independent internet presence is compatible with the inquiry. As this increases lawyer are increasingly driven to pay for listings, thus driving up the cost of doing business. If we allow these websites to charge lawyers for specific referrals, these web sites will take an increasingly large share of the fee, again driving up costs. But this is not like a referral fee where the referring lawyer has an incentive to make sure the case goes to a good lawyer. A website might send a case to a terrible lawyer, collect its fee, and move on to the next automated process. The issue becomes what lawyer pays for the referral, not what lawyer actually is a good referral. This is bad for the profession, and bad for the public. Soon we will be, in effect, working for websites.

  2. I completely agree with Mr. Poulos. I am suspicious that the conversation around de-regulation is being driven by profit considerations masked as concerns about access to justice. Some in bar leadership express angst that filings are down, but do we know why, and is that necessarily such a bad thing? Is one possibility that people are turning to alternative ways of resolving disputes and/or increased legislation in areas such as consumer and financial protection are working? I believe it does a disservice to the profession to presume changes are coming without demonstrating a need other than profits are down. Or that Avvo shut down (Who cares? It was a horrible website that bullied lawyers.) I also believe it’s naive and maybe even disingenuous to conclude without real data that de-regulating the practice of law in Illinois to simply open up profit centers, especially with non-lawyers, will truly serve the justice-seeking public’s best interest. While I appreciate the information and conversation – and, yes, change is often good – I’d like to see the dialogue led from the standpoint of what is truly best for those our profession serves. In fact, maybe we should first think a bit about who that ought to be.

  3. Excellent points Michael and Jeremy. Change for the sake of change is not good. Change in response to failures in our profession to serve people is good. And I agree before we make potentially fundamental changes, we need to evaluate the myriad forces that have led us to where we are and consider (unintended) consequences of changes. We need to carefully study and evaluate. The issues appear to present a Gordian knot, but I am not wholly convinced that a single approach will be successful.

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