Look North to the Future?

Look North to the FutureThe Canadian Bar Association is bold. I just finished reading its in-depth report issued last month: “Futures: Transforming the Delivery of Legal Services in Canada.” Although it is not policy (unless and until approved by the CBA’s governing council which next meets in February 2015) the ideas advanced by the CBA are striking and worth a close read by anyone practicing law in North America. If you don’t have time to read the full report, at least peruse the Executive Summary outlining the report’s 22 recommendations.

After two years of research and study of the major changes affecting the legal profession and what could or should be done to better serve the public, Futures sets forth sweeping recommendations that do not nibble around the edges and are not weighed down by precedent.

The overarching recommendation that would transform the practice of law as we know it today is recommendation number 1, supplemented by recommendations 4, 5 and 6.

No. 1: Lawyers should be allowed to practice in business structures that permit fee-sharing, multidisciplinary practice, and ownership, management and investment by persons other than lawyers or other regulated legal professionals.

The non-lawyer ownership, management and investment referred to in recommendation Number 1 is explained and conditioned by recommendation Number 4, requiring the new entity to comply with fiduciary and ethical requirements. Number 5 explains and puts conditions on sharing fees with, and paying referral fees to, non-lawyers. Finally, recommendation Number 6 explains that these multi-disciplinary practices and alternative business structures (ABSs) would be allowed to deliver non-legal services unless the public interest provides to the contrary.

The safeguards and conditions of the above recommendations include protecting client confidentiality, guarding against conflicts of interest and other ethical duties that lawyers must uphold. The new entities would also be regulated (recommendation Number 8) as a supplement to the current rules-based regulation of individual lawyers.

According to Futures, the recommendations would advance the public interest in improving access to legal services and also acknowledge the central role of lawyers in providing legal services. “Properly interpreted, the professionalism of lawyers allows for innovation in the provision of legal services, as well as the ability to compete in a more global marketplace.”

Currently in Canada, as in the U.S., lawyers may not go into business with non-lawyers; ethical rules prohibit fee-sharing with non-lawyers and non-lawyer investment in law firms. Organizational structures available to lawyers are: sole proprietorship, partnership, limited partnership or professional corporations. In these organizational structures, money is received as fees, expenses are paid and then profits are distributed to the partners. Unlike in corporations, as Steve Dykstra observed, partnerships do not allow profits to be retained and utilized for investment—in say, innovation.

Supporters of alternative business structures (ABSs) argue that outside investors, different service providers, and alternative capital structures can give a boost to various other activities, including financing new legal service delivery models, stimulating better management, enabling greater risk-taking and improving service to clients. In support of the recommendations, Futures cites “good evidence from [the alternative business structures (ABS) models adopted in] Australia and England and Wales that outside ownership need not cause harm to client representation or the public interest.”

If adopted, this constellation of recommendations would revolutionize the legal profession in Canada, and thus influence other countries. Noted Canadian legal industry analyst Jordan Furlong describes Futures as a “watershed moment” that “has the potential to help usher in a new era in legal services on this side of the Atlantic.”

There are other many other recommendations that are notable. Two that dovetail with the work we do at the Commission especially caught my eye.

Recommendation Number 9 would “require law firms, and ABSs if permitted, to comply with diversity-related principles that reflect legal and ethical requirements” and provide “qualitative and quantitative data about the demographic composition of all licensed legal service providers (lawyers, law firms and ABSs)” to the regulatory authorities. The CBA took the position in Futures that the ethical infrastructure in Canada should integrate principles on equality in the profession and access to justice. In a criticism that could apply in the U.S. as well, the Report states, “There is no evidence to demonstrate that the market alone will correct the continued homogeneity of the Canadian legal profession.” Futures goes on to propose a “principle-based compliance model” so that a commitment to diversity in the profession is embedded within the entities delivering the legal services “to allow for more meaningful representation of a diverse Canadian society within the profession.”

Fostering a commitment to diversity and inclusion in our profession is part of the mandate of the Illinois Supreme Court Commission on Professionalism. We strive to do so through education and inspiration rather than regulation. So far, despite wide-ranging initiatives by bar associations, law firms and others, in Illinois and across the U.S., results seem small and short-lived. I wonder, if this recommendation is adopted, whether regulation could be successful at transforming the profession to include individuals more representative of the demographic of the populations we serve.

The very last of the report’s recommendations, Number 22, addresses continuing education or development. It provides that legal regulators should adopt “consistent outcome-based national standards” for continuing professional development and measure whether there is “any link between quantity or input-based CPD and competence.”

Of course we in the U.S. call it “continuing legal education” rather than continuing professional development. And we also are very input-oriented, counting and reporting the required CLE hours or portions of hours. Because our Commission reviews and approves courses or activities as qualifying for professional responsibility CLE credit in Illinois, we are always seeking evidence that the programs actually make a difference. I wonder whether we could replace our attention to the number of hours of CLEs taken with some more meaningful outcome-based measurement of the success of CLE, and what that measurement would look like.

What effect Futures will have here in the U.S. remains to be seen. Some of the same issues are definitely on the radar. The report will no doubt be studied by the American Bar Association’s new Commission on the Future of Legal Service Delivery. In announcing the formation of this new Commission, ABA President William Hubbard explained that, despite all the good efforts of so many lawyers and organizations, there still is a huge gap in our justice system, a justice system that is still not accessible to a majority of the poor of this country and an ever-growing number of moderate-income people. Hubbard outlined the challenge as “[conveying] this sense of urgency to lawyers in America. We need to bridge this justice gap while continuing to deliver services in an effective and efficient way to our existing clients. We all are creatures of habit and like to do things a certain way, but we need to change as a profession—and we need to change more quickly.”

Here’s hoping that the recommendations made by the CBA will help spur that change.

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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

7 thoughts on “Look North to the Future?

  1. “ABA President William Hubbard explained that, despite all the good efforts of so many lawyers and organizations, there still is a huge gap in our justice system, a justice system that is still not accessible to a majority of the poor of this country”

    I think it is fair to say that legal services are inaccessible to the (shrinking) middle class, period. I saw stats on the United States from 10 years ago, cited in a law journal article. It is not just lower income people who lack the ability to obtain legal services. Middle class people often cannot avail themselves of legal aid, either.

    1. Good point. Not sure I could afford an attorney who charged my billing rate when I was in private practice.

  2. My initial reaction to this remains the same as when I served on the ISBA Board of Governors. Lawyers must never relent on fee sharing with non-lawyers. It is the one thing that prevents a giant baking or financial business from setting up a law office as “just one of the many services we offer.” The outcome of that is to have the business dictate to the employee lawyers how to serve client needs.
    While there is a growing need to find innovative ways to get legal services accessible, this is not one of them. (Nor is Legal Zoom — but I will save that for a different post.)

    1. You aren’t alone in having this viewpoint Carl. Thanks for taking the time to share your perspective!

  3. As Heraclitus said in 480 BC: the only thing absolute is change.
    Thoughts for “fee sharing with non-lawyers”:
    1) We lawyers are proud to be “independent” and “free” of most influences in which commercial entities participate and must endure.
    2) Sharing fees with non-lawyers sounds “progressive” and “keeping up the times”. What is its purpose ?
    To serve those less able to afford, but need legal services ?
    How will fee sharing deliver those services ?
    To allow legal services to become more efficient ? What are those efficiencies and how will they be delivered ?

  4. I was not finished with my thoughts. So much for my technical efficiencies !!

    If our source of clients and business becomes dependent in any way upon sharing fees, how beholden do we become to those non-lawyers business entities ?

    Are we placing ourselves at the heart of the lobbying indurstry where special interests prevail vs justice based upon rules of law ?

    When the lawyer “shares” his/her fee, has it reduced his/her income or does the lawyer find a way to make up the difference so the “net” is not compromised ?
    How does this square with hourly charges ? (not a new question by any means)
    In our budget process, do we now factor in a line item: “finder/sharing fees to others” ?
    Who pays for this line item and has it increased our legal fees ?
    Do we really think the practitioner will live on less money or figure out a way to increase the gross ?

    How much influence will the non-lawyer fee sharers have ?

    Let’s not forget we do not have a a police force present in every office, every conference, etc to monitor and enforce ethical behavior. In our practice is it not the rule: ethical and moral actions are critical to professional behavior ?

    I fear the “transfer of wealth” in applying the concept of fee sharing with non-lawyers will only create a conflict through a common denominator called greed—a human nature that will take eons to cleanse from our genes.

    I do not have the answers, but we must surely ponder the consequences of our behavior in business relationships.

  5. Great questions, Dino, and I agree we should ponder the consequences. Also we should consider the issues from the viewpoints of our clients. To the extent that you and the prior commenter may be asserting that lawyers absolutely will not adhere to their ethical obligations if they share fees with non-lawyers, I think you may be selling attorneys short. In addition, must acknowledge the reality that “business” decisions (made, for example, by managing partners in law firms) already influence decisions about client services in law firms. Thank you for taking the time to share your thoughts on these complex issues.

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