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Way out West there were these legal reforms. Reforms to the structure of the legal profession that we should talk about. Now, there was a lot about these reforms that didn’t make a whole lot of sense to the mainstream legal landscape, but that’s because there’s a lot about what’s plaguing the profession that doesn’t make a lot of sense to the establishment legal culture. But Utah and Arizona enacted some fundamental reforms to shake things up and, hopefully, improve access to legal services in their jurisdictions.
With the benefit of some experience, Stanford Law School’s Rhode Center on the Legal Profession compiled a report on these efforts and how they’ve turned out. The full report, Legal Innovation After Reform: Evidence From Regulatory Change, is available here. There’s a lot in here, but the key takeaway is that these states have succeeded in most of their goals… and that’s still probably not going to be enough for the rest of the country.
Arizona and Utah both instituted new rules permitting non-lawyer ownership of legal practices, while Utah also authorized limited non-lawyer legal practice. As the report’s gateway site explains, “The theory driving these changes is that more sources of capital and business expertise, as well as more diversity of legal providers, will reduce the barriers to access to justice.”
So what happened?
FINDING #1: Rule reform in both states is spurring significant innovation in the ownership structure of legal services providers, and lawyers are playing a central role in that innovation.
Not surprising. If you give folks an opportunity to try something different, someone will try something different. With its more limited reform, Arizona is much heavier on traditional law firms, but both jurisdictions are seeing participation from entities like Rocket Lawyer and Hello Divorce. This means that legal service providers are by and large using tech to streamline delivery (which was finding 2).
There’s a reason the legal tech sector celebrates reforms that expand the class of providers. Not only are those working outside the traditional firm model far more likely to be open to new ideas — the first hurdle in tech — but they tend to bring capital along with them, stimulating the market for tech development.
If you’re wondering what an Intermediary means…
Only three total entities, all in the Utah sandbox, fall into the fourth innovation category: intermediary platforms that serve as marketplaces connecting lawyers and consumers and/or provide practice support services to lawyers. Two of the intermediary platforms in the Utah sandbox—Off the Record, profiled in Part IV, and Xira Connect—also have waivers of Rule 1.15 allowing lawyers to use the company to hold and process payments from consumers. While intermediary platforms could be authorized as ABSs in Arizona, ABS status is not necessary to take on ABS regulation because they can already share fees with lawyers directly outside of that framework
So there you go.
FINDING #3: The Utah Sandbox contains the only nonprofits and the only entities that sought authorization to primarily serve low-income people.
FINDING #4: Most authorized entities in Arizona and Utah are serving consumers
and small businesses.
Access to justice used to be about the poor, but it’s increasingly becoming an issue for the middle class as costs climb. It seems that Utah’s more robust reforms are more conducive to serving the traditionally underserved, but both states are getting into the small business market that old school firms have largely left on the outside looking in.
FINDING #5: Authorized entities across both jurisdictions are offering services in a wide range of legal subject areas, but Utah’s reforms are yielding a greater diversity than Arizona’s.
Halfway measures lead to halfway results.
FINDING #9: There are few reported complaints against service providers in Arizona or Utah.
This one goes out to the NCBE and all my bar examiners out there! Being a lawyer isn’t the magic bullet protecting the public.
Both sources of complaint information show little overall complaint activity. According to the Arizona Supreme Court, there have been no reported complaints against ABS entities in Arizona. Utah, which systematically collects data on complaints as part of the reporting requirements imposed on authorized entities who enter the sandbox, a total of eleven complaints reported as of the end of June 2022, approximately one for every 2,123 services delivered. Of those eleven, six were categorized by the regulator as relating to a potential harm caused by the provision of legal services, or one for every 3,892 services. The remaining five concerned other types of complaints—for instance, concerns about a provider’s tone or manner. The Innovation Office determined that each complaint was resolved satisfactorily by the entity.
So Utah has some Karens but otherwise things are running incredibly smoothly.
Alas… where are all the other states? We’ve reached a point as a profession where everyone recognizes that an access to justice gap exists and continues to grow. Protectionism is a pernicious beast, but there must be other states ready to admit that enough is enough and open the door to reform.
Right?
Legal Innovation After Reform: Evidence From Regulatory Change [Stanford Law School]
Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.
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