Is nonlawyer ownership signaling the end for solo/small firms?

If nonlawyers are permitted to perform certain legal functions, won't that strip attorneys of work they eagerly seek? If nonlawyers are able to invest or otherwise partner with lawyers in law firms, is the demise of several solo/small firms the likely result, or will it at least put a severe dent in their survival?

By now, many are aware that the State Bar of California is considering fundamental changes to the practice of law based upon the Task Force on Access Through Innovation of Legal Services' recommendations.

Whenever disruption or change occurs in an industry, it necessarily invites questions of fear or concern. Traditionally, California has barred nonlawyers to perform any type of legal work, let alone have any type of fee-splitting arrangement. There are rationales supporting such limitations, designed to ensure not just that the lawyer's independent judgement is kept intact, but also that the lawyer's duty of loyalty remains with the client as opposed to some third party who only has a financial stake in the firm.

Granted, these reasons remain important, but life has significantly evolved since these prohibitions were put in place. Today's consumer demands access, transparency and affordability in their legal services. In this article, we focus on not only what the task force and others have shared analyzing why these rules do not spell "doomsday" for solo/small firms, but also how solo/small firms may benefit from them. Instead of assuming such disruption or change will inevitably lead to insurmountable problems, we invite attorneys to take a step back and consider possible scenarios, which may challenge us to appreciate these newly created opportunities for consumers, other purchasers of legal services, and even attorneys, too.

Has the End Been Met in Other Jurisdictions?

To begin, the arguments are well laid out in the task force's 251-page report as to why the rules should be changed to allow nonlawyers to have a financial interest in law firms. Despite referencing an article analyzing the liberalization of legal markets in several countries, there appears to be no evidence that the United Kingdom or Australia (countries which have allowed nonlawyers to have a financial interest in law firms) have experienced any catastrophic change to their legal services market from anyone's perspective. See Judith A. McMorrow, "UK Alternative Business Structures for Legal Practice: Emerging Models and Lessons for the US," 47 Geo J. Int'l L. 665 (2016). The article addresses some impact and variables affecting outcomes, but an arguable conclusion from these studies lends itself to believe that each country has had more opportunity result from allowing nonlawyer ownership.

While a changing legal industry landscape may no doubt concern many, this is not the first time we've been through a shift in the legal landscape. LegalZoom, for example, was deemed by many to signal a disastrous impact to solo/small firms when it arrived on the legal services market back in 2001. While it certainly gained market share, it also hasn't wiped out solo/small firms. This begs the question as to whether nonlawyer legal services only capture consumers/small businesses who otherwise weren't interested in lawyers and/or cannibalized a segment of that market, without signaling the end of solo/small firms.

Fear Not, Find Your Place

Should the rule pass, let's examine some exciting possibilities to allow nonlawyer equity partners to have a financial interest in law firms:

• Expansion: Solo/small firms may seek the right equity partner to expand their firm, growing offered legal services and giving highly desired access to clients (arguably can be different/better that the traditional lending sources).

• Merger: Assuming equity capital exists, solo/small firms might want to merge with other solo/small firms focused on attempting to create greater efficiencies for firms and access for clients.

• Acquisition: For practitioners aiming for retirement or other exit opportunities, equity capital may facilitate solo/small firms' ability to be acquired by larger firms, possibly creating a more lucrative exit strategy.

• Technology: Solo/small firms may be able to equity partner with law related technology companies to provide greater efficiencies, economies of scale, services and access for clients.

• Franchising: Solo/small firms can become, or enhance their existing practice with, a franchise business model, which has been done for years with other similar professional services (e.g., H&R Block, Liberty Tax, and Jackson Hewitt in the tax world, and The Joint's 450 locations in the chiropractic world).

• Any combination of the above: There's so much flexibility and room for creative thinking to identify how a relationship with non-attorneys can be positive for the profession and even more so for clients.

Of course, this list isn't exhaustive, nor is it perfect or applicable to every single lawyer or law firm. The point is that change is likely, so rather than lament or voice resistance rooted in primarily protectionist motivations, why not explore how such disruption can be an opportunity?

Keep in mind that the State Bar was not designed with lawyers as the primary concern; its mission is to protect the public. It seems that a balance can be struck. Namely, to ensure that lawyers maintain independent judgment and focus upon client needs, while still challenging lawyers to work with nonlawyers to innovate and modernize this industry to today's public needs. In our view, this is plain to see in the proposed new rule in the task force's report for those open and optimistic enough to find it.

Other fundamentally necessary industries have adapted to changing landscapes to ensure their own success and/or survival in professional services. Medicine has seen investors and/or other business people work alongside doctors for quite some time. Doctors enhanced their practices with either partnerships, or in some cases sales, with non-medical professionals. Of course, medicine and its relationship with non-medical professionals isn't perfect and absolutely has room for continued improvement. The point is that while change is difficult, it's a necessary precursor to explore and evolve for the mutual benefit of the practitioner/patient or attorney/client.

Revolve or Evolve?

As the rules allowing nonattorney ownership in law firms may change, the questions for many lawyers is whether we want watch as the legal world passes us by, or whether we proactively want to evaluate how to be an integral part of such change, and to maximize any opportunities that are likely to develop. There's the probability of more to gain by working with nonlawyers, so rather than adhere to the typical knee jerk reaction of seeing this radical change to the industry as a threat, we want to invite attorneys to choose not to revolve, but evolve and figure out how practicing in today's new legal environment might actually benefit both lawyers and their clients. 