ENGLISH (832) 930-3059 | SPANISH (832) 356-7254

Rethinking the Regulation of Legal Services: What States Are Doing to Move the Needle on Access to Justice | Stanford Law School – Stanford Law School

  • Attorney Daniel Albert
  • Family Law
  • Rethinking the Regulation of Legal Services: What States Are Doing to Move the Needle on Access to Justice | Stanford Law School – Stanford Law School

The Stanford Center on the Legal Profession has been front and center in state-level efforts to rethink how legal services are regulated to widen access to justice. Since 2020, both Utah and Arizona have dramatically revised the rules around legal practice ownership and unauthorized practice of law. Several other states are considering reforms, including California, Michigan, and North Carolina, among others.
On May 6, 2022, the Judicial Conference of the Fifth Circuit commissioned a panel on regulatory reform titled “Regulatory Reform of Legal Services: Who, What, When, Where, and Why,” featuring Chief Justice Bridget McCormack of the Michigan Supreme Court, Justice Deno Himonas (Ret.) of the Utah Supreme Court, and Lucy Ricca, Director for Policy and Programs at the Center on the Legal Profession.
Below, Center Co-Director and LSVF Professor in Law, David Freeman Engstrom, follows up with the panelists to discuss the panel’s reception at the Fifth Circuit.
Most lawyers know that many Americans cannot afford a lawyer when they need one. Most also know that ethical rules guide and restrict their practice of law. But many lawyers do not know that the two are connected. Deno, what’s the connection?
Himonas: You’re right. In discussing regulatory reform before an audience like the Fifth Circuit Conference, our first task is to make that connection—to show how the justice gap is created, in significant part, by the rules restricting how legal services can be financed and run and who may provide them.
When I present on the justice gap, I never assume that my audience is aware of the size and scope of the problem. Those of us who have spent time in the trenches know that we have a crisis in the United States when it comes to the access and affordability of our civil justice system. Most others do not.
Data show that our civil justice system has become so expensive and inaccessible that it is failing the American people. Data suggest that 62 percent of American households report at least one legal problem each year, with a household average of three. Given that the average lawyer charges $300 per hour, it is no wonder that most Americans don’t engage with the legal system at all.
Importantly, too, it isn’t just the poorest Americans who cannot afford our system. It’s nearly everyone. So, it’s no wonder that when, in Utah, we looked at the largest judicial district in the state, we discovered that in 9 percent of filed cases one or both parties were unrepresented. In fact, in the family law arena in Utah, one or both parties go unrepresented in over 60 percent of the cases, in debt collect approximately 99 percent of respondents are unrepresented, and in landlord/tenant, approximately 98 percent are unrepresented.
So back to how this yawning gap relates to the regulation of lawyers and legal practice. The reasons for the gap are easy to see. We developed a complex legal system, then injected a requirement that only lawyers can provide the advice necessary to navigate the system. We further limited the business of law by saying only lawyers can own law firms. The impact has been terrible for citizens with legal needs.
What is to be done? And why not just increase legal aid funding or impose mandatory pro bono to close the gap?
Himonas: Some, I know, argue that we should instead increase our pro bono commitments and funding of Legal Aid. These are laudable goals. But the reality is they will not get us there. The most recent estimate that I’ve seen suggests that every lawyer would have to perform 900 hours of pro bono service—meaning every lawyer in the U.S. would have to donate upwards of half their year—in order to provide even an hour of legal counsel to each American for each civil justice need.
One of the innovations we launched in Utah was licensing specially-trained non-lawyers to provide legal advice in the areas of family law, debt collection, and landlord/tenant. These are three areas where the justice gap is widest.
In addition to licensing specially-trained non-lawyers to provide certain legal services, Utah (and also Arizona) has also moved to permit non-lawyer ownership and investment in firms. Why take that tack? How is that supposed to expand access?
Himonas: Much of the theory on this has been wonderfully articulated by Professor Deborah Rhode and Professor Gillian Hadfield (SLS ‘88). As they explain, Model Rule 5.4 keeps lawyers from sharing revenue with nonlawyers—and that prohibition has made the provision of legal service very expensive. Worse, the ban on fee-sharing has cut the legal industry off from the innovation-fueling benefits of modern capitalism, including most forms of capital investment and equity-based compensation.
The Utah Court focused on Rule 5.4 in addition to the unauthorized practice of law because it wanted to create the opportunity for new business structures, with both lawyers and non-lawyers owning equity, and new legal companies funded to build new service models and reach new consumers. It will take time, likely many years, before we see robust one-to-many and technology-driven solutions that help low-and moderate-income people and small businesses. But that doesn’t mean that we should not do it.
Arizona and Utah have taken pretty different approaches to regulatory reform. Can you give us a snapshot of how each state is going about it?
Ricca: Arizona has taken a centralized and prescriptive approach to regulatory reform, creating new categories of providers and setting up definitions and rules and requirements for them. The Court repealed Rule 5.4 entirely and established a licensing system for “Alternative Business Structures,” or ABS. ABS are legal practice entities with non-lawyer ownership or management, but only lawyers practice law. They must comply with numerous requirements to participate, including having an Arizona lawyer in a compliance officer role. Some 20 ABS have entered the Arizona system. In parallel, Arizona also created a Licensed Paraprofessional (“LP”) role—in effect, “nurse practitioners” for law. There are currently 17 LPs practicing in Arizona.
Utah’s project is different. First, Utah is pursuing multi-pronged reforms to expand access to justice, including online dispute resolution for small claims and paraprofessional licensing. Most innovative, in my opinion, is the regulatory sandbox—an experimental policy space within which certain rules can be relaxed to permit innovative legal services delivery models to be piloted and tested. In Utah, the sandbox creates room for entities owned by non-lawyer investors and managers and entities in which non-lawyers or technology provide legal services, including legal advice.
What do we know about the impacts of these reforms in Utah and Arizona so far? Are we seeing new services and are they reaching new consumers?
Ricca: It’s still early. The sandbox launched in mid-2020 in Utah and Arizona started licensing ABS in early 2021. So far, many of the entities are lawyers partnering with non-lawyers in one form or another—for instance, a lawyer partnering with a tax advisor or a business consultant. But we are seeing some interesting models from larger-scale entities: LegalZoom is an Arizona ABS, and Rocket Lawyer is in the Utah sandbox. Both offer robust software platforms that help consumers assemble and complete legal documents. Both are hiring lawyers as employees to assist their consumers with discrete legal questions or issues beyond the capacity of the software. Given the numbers of consumers each company serves (in the millions), you can see some really impactful possibilities here.
Utah is collecting data on the services provided in the sandbox, and the data is encouraging. It shows that almost 20,000 services have been furnished to more than 10,000 discrete consumers. Furthermore, services are being provided across a range of legal service areas (the top areas at the moment are veterans’ benefits, business services, personal injury, end of life, and family issues). We have seen services touch 15 of Utah’s 17 legal deserts (areas where legal help is scarce). Most importantly, we have seen all this with very few consumer complaints. Only four complaints alleging legal harm have come in; all have been remediated to the sandbox regulator’s satisfaction.
Chief Justice McCormack, Michigan has not yet moved on regulatory reform. But you are clearly engaged and considering your path. What are the next steps?
McCormack: Michigan, like every other state, has struggled with an enormous civil justice gap for generations. While many well-meaning lawyers and judges have worked on responses to the problem, most of that work has been targeted and incremental.
Further, the justice gap is a practical problem—moms unable to get child support or veterans unable to get benefits. But it’s also more than that. The rule of law is only a set of ideas that depends on public confidence. If most Americans are unable to resolve their justice problems because they don’t have the resources or the information to do so, the public’s confidence in the rule of law will suffer.
That is why in 2019 we launched a strategic planning process to respond to this problem. With the support of the National Center for State Courts, we set up a Justice for All taskforce to inventory the gaps in Michigan’s civil justice infrastructure and come up with innovative ways to address them. One innovative path forward is clearly regulatory reform.
I know you’ve been engaged in thinking about the reform of legal education as well, and it seems clear that regulatory reform and legal education reform are interrelated.
McCormack: Regulatory reform is one piece of a solution to the complex access to justice problem. There are other system stakeholders who will need to be part of a permanent solution: the profession, the legal education system, and its accreditor. And I see promising signs of change across stakeholder groups. Change won’t come easily. But I do believe change will come. And the legal profession—and the American people—will be better for it.

source

Leave A Reply

Subscribe to our newsletter and promotions