Nonlawyers giving legal advice: Madness or prudence?

This question was raised recently in opposition to proposals by the State Bar of California regarding fee-sharing and nonattorney ownership of law firms: Why are we even contemplating this madness? The stage was set for this eventuality when the American Bar Association, in 2012 after a heated debate lasting for a year, rejected efforts to propose a new model rule that would permit lawyers to practice in firms owned in part by nonlawyers.

At the time, although other countries were considering alternative law firm structures as early as 1991, Washington, D.C., was the only jurisdiction in this country allowing nonlawyers to hold ownership interests in a law firm, so long as professional services were provided by the nonlawyers in the firm, the firm’s clients were solely offered legal services, and nonlawyers were required to follow the rules of professional conduct.

Subsequently, in 2012, an ABA working group proposed something similar based on the Washington D.C.’s rules regarding legal services. However, the effort failed due to the response indicating “lawyers were overwhelmingly suspicious.”

Not to be deterred, the D.C. bar has announced an effort to consider approval of “alternative business structures” (providing legal services to receive licenses enabling outside ownership or nonlawyer investment) and “multidisciplinary practice” (alternative business structures where a firm provides both legal and legal services), as areas to be considered.

In California, Oregon, Utah and Arizona similar changes to attorney regulation are being considered, and the Chicago bar association will have its own similar task force in the fall. During this month the ABA House of Delegates midyear meeting will also consider a resolution to permit outside ownership of law firms, encouraging other jurisdictions in this country to experiment with new regulatory models, including those related to the unauthorized practice of law.

For those expressing surprise, if not actual shock, at such a development considering the cherished history of the profession, it appears other bar associations have subsequently entered the discussion through specific action. In October 2019, Utah announced plans to lift certain restrictions on nonlawyers in the state. One recommendation was changing or perhaps repealing the state bar’s prohibition against law firms and other legal services providers from sharing fees with nonlawyers. The impetus of the effort was to create a system that will provide high-quality services to the public, but not limited to lawyers.

In the fall, training for Arizona nonlawyers to provide legal advice will start under the auspices of the University of Arizona James E. Rogers College of Law. This will be a two-year pilot project licensing a small group of nonlawyers who could give limited legal advice on certain specified topics in civil matters originating in cases of domestic violence. The participants will be referred to as “licensed legal advocates.” The goal is to eliminate restrictions on partnerships with nonlawyers in the practice of law. The idea is to ensure public protection from “inept, unprofessional or fraudulent services.”

In California, nonlawyers (“legal technicians”) would offer legal advice and partly own law firms under the proposals for change. Further, among other changes, nonlawyers would have no power to direct or control the professional judgment of the lawyers.

In the case of allowing state-approved businesses to employ legal technology to deliver legal services protecting client communication with such entities would be covered by the attorney-client privilege. These services would require a regulator who would establish ethical standards governing the provider and the technology; and, lawyers could share fees with nonlawyers so long as the client provides written consent.

The background motivation for these change recommendations is the cost of legal services and pricing consumers out of the market by continuance of rules of ethics that prevent lawyers from working with other disciplines. Unlike California, in Oregon, there is interest in licensing paraprofessionals who could offer limited legal advice and allow those without law degrees to take the bar exam.

Notwithstanding the efforts for reform, there are warnings concerning “dangerous changes to lawyer regulation” and predictions of outside investment of law firms and nonlawyers practicing law. These expressions of concern come from bar associations in New York, Ohio, New Jersey, Illinois, Pennsylvania and Delaware, that the proposed modifications appear to be “very dangerous changes to the legal profession.”

Still the efforts of the ABA deliberations have stopped short of endorsing any one legal service provider. Model rules, such as the ABA Model Rules of Professional Conduct, would not automatically affect rules in any state, and the ABA proposal would be just that and nothing more in those jurisdictions.

It has been reported from the opposition in California that one big law partner (Elizabeth Sperling of Alston & Bird LLP) complained in a letter to the bar: “This is madness. Why are we even contemplating allowing nonattorneys to practice law and provide legal advice?” Sterling questions why the bar would consider permitting nonattorneys to practice law when there are attorneys admitted to the bar “who are barely competent and provide questionable advice ... [and] commit ethical malfeasance … How much worse will it be for people who are not even attorneys?” The opposite rationale from Joanna Mendoza, who is a member of the bar’s Access Through Innovation of Legal Services Task Force, is “there are still some challenges for the bar, but the inability of so many people to use legal services in California is getting worse.”

Traditionally and historically, lawyers have looked at the State Bar as “their” organization, when in fact it is a “consumer protection” agency with the goal of improving the lot of the public and protecting it.

The current recommendations and efforts to implement sweeping change in California have their roots in a State Bar-commissioned report from Indiana University law professor William Henderson. His report indicates that rules of ethics prevent lawyers from working with other disciplines and increase the cost of legal services that price consumers out of this market. So, we must answer the question: Is this “madness” or prudence on the one hand, or the beginning of an excursion on the road to potentially reducing lawyers to an ancillary function in corporate America?

What will it mean for law schools and their graduates if these traditional restrictions are eased? The approaches of each of the four bar associations (California, Oregon, Arizona and Washington, D.C.) would seem to indicate a growing consensus regarding rules reform even if the outcome of these efforts appears to be uncertain. 