Utahlking real reform? Yes, Utah absolutely is.

Infrequent readers will know this pun structure is one that I have no shame in running into the ground every time it is relevant.

Frequent readers will know I am far too willing to break the fourth wall here. So just for background I had resigned myself to writing a post on Friday about the New Jersey lawyer who could only get reinstated to practice if he could assure that his wife would not have any further access to their trust accounts and it was going to likely be unnecessarily preachy and riddled with hacky references to how hard that might be when everyone is trapped in their house. So, while you are only getting content a few days late, thanks to Utah you at least are spared that the content that could have been.)

Last Friday, Utah released for public comment the final version of its work product for an overhaul of significant parts of its ethics rules. If you need to get back up to speed on that issue and the pre-pandemic discussions of it, you can find prior posts about the rapid work of Utah’s task force here.

If you’d rather read the source materials put out for public comment on April 24, 2020 yourself, you can get to them all through this link.

If you’ll allow me to describe them to you in all of their relative glory, I’ll do so now.

I’d like to start with what ought to be the least controversial piece but a part that still really ought to be cherished for the elegant thing that it is, reducing the rules on lawyer advertising down to the core and nothing but the core.

  • The Utah Supreme Court’s proposal would eliminate RPCs 7.2, 7.3, 7.4, and 7.5 and, instead, revise RPC 7.1 to address the terrain by (a) prohibiting lawyers from making false and misleading claims about themselves or their services and (b) prohibiting lawyers from going about dealing with people in ways that involve coercion, duress, or harassment.

If any state were proposing to do this to their advertising rules, and only just this, it would be an exciting development toward important regulatory reform. But wait … there’s so much more to Utah’s proposal. As a result, comprehensive reform of the advertising rules is nearly just the icing.

The centerpiece of Utah’s proposed rule revisions though involves an overhaul of RPC 5.4 in the form of the creation of two rules, one 5.4A that will look a good bit like the current rule with one very significant change and another 5.4B that will look like nothing that has been actually implemented so far in the United States.

Under the proposal, RPC 5.4A will apply to lawyers who continue to operate in the traditional fashion (read, at least in its pre-pandemic context to mean working in a law firm owned and operated only by lawyers). That rule would carry forward existing restrictions on partnerships with non-lawyers and on operating in the form of any entity in which someone who is a not a lawyer has a financial interest but would permit lawyers in such conventional settings to be able to share fees with people other than lawyers as long as sufficient disclosure is made to the client (and anyone other than the client who is paying the fee) about the fact that such sharing is occurring/going to occur and with whom. The rule though is also refashioned to make clear that lawyers still can only do these things as long as there is no interference with their independent professional judgment, maintaining their loyalty to their client, and protecting client confidences.

(One other seemingly pedestrian item in its package of revisions is to remove the current restrictions on fee sharing between lawyers not in the same firm by deleting RPC 1.5(e) altogether. This makes a lot of sense on a standalone basis as a variety of jurisdictions already permit “naked” referrals between lawyers not in the same firm as long as there is a certain amount of disclosure, but if you are going to open the doors for lawyers to share fees with people who aren’t lawyers then you certainly have to drop the RPC 1.5(e) approach.)

RPC 5.4B would be a new thing altogether and would govern the conduct of lawyers that choose to practice in nontraditional structures as part of a legal regulatory Sandbox to be launched Utah. This proposed rule establishes an ability for lawyers to practice in ways that RPC 5.4A would prohibit as long as there is no interference with any of the lawyers duties that are also stressed in RPC 5.4A (independent professional judgment, loyalty, and confidentiality). Specifically, what it permits is best described using the proposed rule itself:

(b) A lawyer may practice law with nonlawyers, or in an organization, including a partnership, in which a financial interest is held or managerial authority is exercised by one or more persons who are nonlawyers, provided that the lawyer shall:

(1) before accepting a representation, provide written notice to a prospective client that one or more nonlawyers holds a financial interest in the organization in which the lawyer practices or that one or more nonlawyers exercises managerial authority over the lawyer; and

(2) set forth in writing to a client the financial and managerial structure of the organization in which the lawyer practices.

And to implement the Sandbox concept that RPC 5.4B will permit lawyers to participate in, and to make sure that there exists an entity that will have regulatory authority over those participants in the Sandbox who are not lawyers, the Utah Supreme Court has released a proposed Standing Order that would be the foundational document for establishing the relevant regulatory entity and the regulatory principles that will govern its work.

The relevant regulatory entity will be the Office of Legal Services Innovation and, for a pilot period of two years from whenever the effective date of the Standing Order comes to pass, this Innovation Office will “establish and administer a pilot legal regulatory sandbox (Sandbox) through which individuals and entities may be approved to offer nontraditional legal services to the public by nontraditional providers or traditional providers using novel approaches and means, including options not permitted by the Rules of Professional Conduct and other applicable rules.”

And, as for the relevant regulatory principles? Those will be as follows:

  1. Regulation should be based on the evaluation of risk to the consumer.
  2. Risk to the consumer should be evaluated relative to the current legal services options available.
  3. Regulation should establish probabilistic thresholds for acceptable levels of harm.
  4. Regulation should be empirically driven.
  5. Regulation should be guided by a market-based approach.

There is a 90-day comment period on the proposal which ends on July 23, 2020. That comment period is not only for Utahns. (And, yes, according to the Standing Order that is how to refer to a collection of residents of Utah. College football fans likely believed, and My Cousin Vinny fanatics would likely have been demanding, that Utes to be the official term.)

There will be content.

So, it is March 20, 2020. We don’t know much about much in terms of what comes next. Stress and anxiety are most folks constant companions at the moment I’m certain. (And I bet a lot of you weren’t expecting the need to tech competence under the ethics rules to come at you quite this fast.) Whether or not there will be things to read here probably matters almost not at all to most people. Nevertheless, for better or worse, as long as I’ve got access to the internet I will plan to continue to post contents on the same weird and unsettling sort of “schedule.” Today’s another one of those days.

Today’s post is an opportunity to talk a bit about the dark side of litigation funding. Now, do not get me wrong, I’m generally “pro” when it comes to the topic of litigation funding. In fact, I had the opportunity to be a lawyer for one of the early litigation funding companies that operated in a niche, high-end space. Even then, one of the consistent issues for a company doing things the right way was the stigma of litigation funders as being companies that would take financial advantage of people in need.

Today’s story isn’t exactly about taking advantage of the kind of person in financial need you might think of, but it certainly is a story that sheds some light on unsavory aspects of an industry that speculates on the outcome of litigation.

Today’s story though also is something of a revisiting of the travails of a prominent California law firm that I’ve written about a few times in the past. Those posts had focused on a very contentious set of litigation matters between the firm and one of its former partners that effectively boiled down to a “he said, it said” sort of situation where the “he” was saying that the “it” was engaged in financial fraud and fired him when he raised questions about it and the “it” said that “he” was a sexual harasser. (If you aren’t familiar with that post, you can catch up here.)

It’s been a very bad couple of weeks for just about everyone in the United States. It’s been an even worse couple of weeks for John Pierce, the founder of the Pierce Bainbridge law firm. It has been such a bad couple of weeks that it is hard for an objective viewer not to think that the previously-referenced “he” seems to have a leg-up in proving his side of events against the “it” in the “he said, it said” landscape.

Before elaborating on the litigation funding issue, just a short recap of the recent chronology of events for the founder of this particular law firm.

And, about that deal, that is the deal with Parvati Capital that was front and center in the allegations in the “he said, it said” litigation. As a result of the Philadelphia suit, the details of that arrangement have come out and involve a highly -unusual approach to litigation funding where the law firm was given the sole responsibility for placing a value on their cases as part of agreeing to a 50-50 split with the litigation funder on the fees obtained in such future cases.

If you have access to Law360, you can read a pretty good article about that piece of the puzzle, one in which a former law partner of mine (who I practiced with back when I had the chance to represent a good litigation funding company many years ago) speaks on the ethical problems with the Parvati Capital deal. (Spoiler: pretty squarely an RPC 5.4 problem since it quacks very much like a fee-sharing duck.)

There are lots of aspects to dealing with litigation funding arrangements that can raise difficult ethics issues. But there are a variety of ways to obtain litigation funding within the ethics rules. Interestingly enough, while the Parvati arrangement seems very problematic as to some issues, and while having the lawyer assign a value to cases is bad news for a variety of reasons, such an approach does avoid altogether problems with navigating how to share documents and other details with a litigation funder for purposes of evaluating a case while doing what can be done to comply with RPC 1.6 and seek to protect privilege and work product.

Late to the podcast party.

As a white male in my mid-forties, it was probably inevitable that I’d end up with an appearance on a podcast since an unfathomably high number of podcasts are showcases for my demographic to espouse their views on things. While I’m a bit late to the party (46), my turn has come around.

More seriously, I was grateful and honored to be a guest on The Podvocate, a podcast produced through the Loyola School of Law in Chicago. We talked about the future of legal ethics with an emphasis on the impetus for, and the state of play of, efforts to re-regulate the profession but also weaved into the discussion a slice of what’s going on in D.C. and whether lawyers are demonstrating reason to believe they value independence of professional judgment under our current system. You can give it a listen at this link: https//soundcloud.com/thepodvocate/season-2-episode-17. The host, Jim Alrutz, does a very fine job of steering the discussion and has a bright future.

If you’re looking to read the voice of someone who is not a white male in his forties on one of these topics, I’d recommend checking out this post from a friend who is a lawyer in Wisconsin at her blog: www.ethicking.com. The post is more than a month old at this point, but, if you haven’t read it, it’s still quite good.

ABA favors innovation but really stresses the “no” part.

Okay. Now that all of the problems with the erosion of the rule of law in our country have been solved, I can write that post about the onslaught of developments in the last little bit related to potential efforts to “re-regulate” the legal profession.

Just kidding. Rule of law is still ENTIRELY in jeopardy despite the fact that more than 2,000 former officials of the U.S. Department of Justice have co-signed a letter calling on the current Attorney General of the U.S. to resign.

Nevertheless, we are doing this long-contemplated post today. So, in just the first two months of 2020, there have been several developments demonstrating continued momentum for reform in the world of legal ethics and the delivery of legal services.

In Utah, that states rapidly-moving effort continues apace. Utah’s Implementation Task Force on Regulatory Reform is up and running. And its website is accepting inquiries about participation in its Legal Regulatory Sandbox at this link.

In Arizona, a petition was filed on January 30, 2020 seeking to have the Arizona Supreme Court, among other things, delete its RPC 5.4. The petition was filed by a member of the Arizona Task Force on the Delivery of Legal Services who serves as the Chair of one of its work groups. The petitioner also happens to be Administrative Director of the Arizona Administrative Office of Courts.

Even earlier during January 2020, the Global Legal Practice Committee of the D.C. Bar put out a formal request for public comment about a number of topics related to its existing RPC 5.4. In so doing, Washington, D.C., which has permitted a limited form of non-lawyer ownership opportunities in law firms since 1991 has now announced feedback on seven pretty-thorough bullet point requests, ending with: “If D.C.’s existing Rule 5.4 should not be changed, why not?”

News reports in January 2020 indicate that the Connecticut Bar has launched a task force called the State of the Legal Profession Task Force.

California has a crucial meeting of its Task Force on Access Through Innovation of Legal Services on tap for February 24, 2020. The agenda for that meeting lists seven report and recommendations and one clarifying statement up for consideration. Included in the list is not only what sounds like some minor amendments to California’s RPC 5.4 but also implementation of some form of regulatory sandbox focused on being a pilot program to gather data, and the study of a licensing program to allow people other than lawyers to provide certain kinds of limited legal services.

And, most recently, the ABA House of Delegates has adopted Resolution 115 to seek to encourage states (such as those mentioned above that are already far out in front of the ABA) to pursue innovation.

When originally circulated, ABA Resolution 115 was the kind of thing that read as short, to the point, and (particularly given all the task forces already in place in various states) seemingly not truly all that controversial:

RESOLVED, That the American Bar Association encourages U.S. jurisdictions to consider innovative approaches to the access to justice crisis in order to help the more than 80% of people below the poverty line and the majority of middle-income Americans who lack meaningful access to civil legal services.

FURTHER RESOLVED, That the American Bar Association encourages U.S. jurisdictions to consider regulatory innovations that have the potential to improve the accessibility, affordability, and quality of civil legal services, while also ensuring necessary and appropriate protections that best serve the public, including the provision of legal counsel for children facing essential civil legal matters, for anyone facing a possible loss of physical liberty, and for low income individuals in adversarial proceedings where basic human needs are at stake.

FURTHER RESOLVED, That the American Bar Association encourages U.S. jurisdictions to collect and assess data regarding regulatory innovations both before and after the adoption of any innovations to ensure that changes are effective in increasing access to legal services and are in the public interest.

And, yet, even that was a step-too-far in the world of ABA politics as a number of prominent slices of ABA membership, including the New York State Bar and the Solo and Small Firm section of the ABA, went on the attack against Resolution 115 as a radical proposal.

Perhaps thinking it would be hard to imagine how the reaction to a sort of milquetoast resolution encouraging the exploration of innovative ideas to engendering such vociferous opposition, far too many media outlets reported on the resolution as proposing significant changes to the Model Rules when, in fact, no rule revisions at all were actually included.

Thereafter, the forces in favor of Resolution 115 made amendments to try to provide reassurance to the clamor from a variety of groups. In so doing, what was already a “meh” proposal was watered down even further. Specifically, the resolution was revised to add an additional “Further resolved” paragraph at the end:

FURTHER RESOLVED, That nothing in this Resolution should be construed as altering any of the ABA Model Rules of Professional Conduct, including Rule 5.4, as they relate to nonlawyer ownership of law firms, the unauthorized practice of law, or any other subject.

The extensive and thorough report that accompanied the Resolution was also pared down to remove references to, and discussions of, a number of efforts at exploration that have occurred or are under consideration in various jurisdictions, including in the area of considering revisions to RPC 5.4 and to allowing non-lawyer ownership. As a result, the original nine-page report became a three-page report. And given that the addition of the third “Further Resolved” paragraph just reads as surplus of the silly sort, it is the defenestration of 2/3 of what the Report had to say originally that is the true loss.

Having been further watered down to the point where it was still a resolution encouraging innovation but strongly signaling that some innovations would be encouraged a lot less than others, Resolution 115, as amended, passed the ABA House of Delegates with overwhelming support.

I mean, “Yay!” … I guess. If a half of a loaf is better than no loaf at all, then so it follows as well that a quarter of a loaf is better than the complete absence of a loaf. But I still can’t help but think of the message of Resolution 115 as being a lot like one of my favorite moments from the show Reno 911:

And I tell you what, ma’am — We are gonna tell you that we are gonna try our best.

That’s what we’re gonna tell you. We’ll try our best. Thank you.

We aim to try. We aim to try — That’s our motto.

That’s what our motto is becoming.

My favorite post of 2019

For the second straight year, I’m ending the year with an homage to a concept (ripping off an idea) pursued by Nate DiMeo the writer and performer of The Memory Palace podcast. I’m going to re-post what was my favorite post from the past year.

Deciding what to put out there again this year was fairly easy as it is a post that (I think) offers the most solid and original idea about anything related to ethics that I offered up this year. It also continues something of a theme of last year’s repeat offering as it focuses on what the profession should be moving toward and, thus, also is a nice way to usher in a new year — particularly a new year where the numbering offers plenty of opportunities for puns about vision.

Of course, as often happens when I think I have offered up a solid and original idea, it ends up pretty much entirely ignored. So, let’s give this one another chance to gain relevance.

Loosing a big (maybe?) idea into the world.

I had originally promised myself that the articulation of this thought would debut here at my blog. I almost managed it but I raised this notion in the real world lately among some very bright lawyers. So, before I do it again somewhere other than the Internet, I’m following through to put this idea out through this platform for anyone who wishes to chew on it to chew on it.

The only background that I think you need (even if you are not a regular reader of this space) is that there is much activity going on across the country in terms of real efforts at proposed change to the way lawyer ethics rules address certain topics that are largely viewed as barriers to information about the availability of legal services.

Two of the potentially most important, and relatively fast-moving, endeavors are the work of the California Task Force on Access Through Innovation of Legal Services, the APRL Future of Lawyering project. But there is movement happening in a number of different states to propose changes to the ethics rules to loosen, if not outright delete, restrictions on monetary and other arrangements between lawyers and people who are not lawyers, that are currently placed in rules patterned after ABA Model Rule 5.4 (generally prohibiting fee-sharing with people who are not lawyers) and 7.2 (restricting the ability of lawyers to make payments to others for referrals to, or recommendations of the lawyer).

It is anticipated that there will be some significant level of outcry over any such proposed changes on the grounds that removal of such rules erodes the protection against lawyers having their exercise of independent professional judgment interfered with. Most every time I engage with anyone on that topic, I find myself making the point that, even without those provisions, the rules still require lawyers to maintain their independent professional judgment.

But, here’s the idea I am letting loose into the world: perhaps we should make that obligation more prominent. At present, outside of any particular context, the only rule that plainly starts down this path is the first sentence of Rule 2.1 which reads: “In representing a client, a lawyer shall exercise independent professional judgment and render candid advice.”

Should we, as part of the coming necessary reform of the ethics rules, revise the first rule? Perhaps like this?

Rule 1.1: Competence and Independence

(a) A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.

(b) A lawyer representing a client shall not permit any person to direct, regulate, or otherwise interfere with the lawyer’s exercise of independent professional judgment.

If that rule existed, then in all places in which restrictions considered to be barriers to access to legal information but which are justified because of the risk to lawyer independence could be replaced with a pointer back to the lawyer’s obligation under Rule 1.1(b).

Then I went and slept on Arizona

So … as far as 400th posts go … this should be my best 400th post at this blog.

A while back I warned everyone not to sleep on Arizona when it comes to movement toward radically reshaping the regulatory landscape for lawyers. Apparently, I should practice what I preach because Arizona’s Task Force on the Delivery of Legal Services put out its most recent report a month ago, and I haven’t gotten around to reading it or writing about it until now.

You can read the full report and its appendices here, but the headline that matters for today is that the Arizona task force — like Utah before it — has also proposed eliminating altogether Arizona’s Rule 5.4. The report includes a large number of other proposals aimed at improving the delivery of legal services in Arizona but because of the dynamics involved, any serious proposal in any state to throw open the doors to lawyers being able to practice in firms owned by people who are not lawyers will consume all of the oxygen in any given room.

As with all of the reports that are being churned out by various work groups, the Arizona task force report spends a lot of time discussing issues associated with the “justice gap.” The Arizona report does a pretty good, very pithy, job of making the point that many hear but don’t allow to fully marinate when thinking about these issues — on average, real people (as opposed to corporate people) don’t hire lawyers for much of what they need to be hiring lawyers for and, on average, lawyers who work in small firms don’t have enough work to do to make ends meet.

While admittedly blending together data involving disparate time periods, the Arizona report nicely blends together information written about by Professor Henderson and data made available by Clio:

One reason for the current “justice gap” is that the costs of hiring lawyers has increased since the 1970s, and many individual litigants have been forced to forego using professional legal services and either represent themselves or ignore their legal problems. Professor William D. Henderson, Indiana University Maurer School of Law, has noted the alarming decline in legal representation for what he calls the “PeopleLaw sector,” observing that law firms have gradually shifted the core of their client base from individuals to entities. Indeed, while total receipts of United States law firms from 2007 to 2012 rose by $21 billion, receipts from representing individuals declined by almost $7 billion.

[snip]

According to the 2017 Clio Legal Trends Report, the average small firm lawyer bills $260 per hour, performs 2.3 hours billable work a day, bills 1.9 hours of that work, and collects 86% of invoiced fees.11 As a result, the average small firm lawyer earns $422 per day before paying overhead costs. These lawyers are spending roughly the same amount of time looking for legal work and running their business as they are performing legal work for clients.

In reaching the conclusion that Rule 5.4 should simply be scrapped, the report explains that the task force considered and rejected options to just amend Arizona’s Rule 5.4 to do something closer to what the D.C. Rules have long permitted at the entity level and also rejected a small “sandbox” sort of arrangement that would have allowed just applicants who could get approval to run “pilot” project style efforts.

The Arizona report, like Utah’s before it, also has an eye toward creating a mechanism for “entity” regulation. Interestingly, the Arizona report also recommends scrapping Rule 5.7 regarding law-related services in light of the deletion of Rule 5.4’s prohibitions and in favor of amendments to other rules to make clear that the kinds of protections that a rule like Rule 5.7 gave a lawyer a mechanism for not having to afford to customers who were not clients should always be afforded to customers in a post-5.4 world whether clients or not. Also, as indicated would be the case in my earlier post about the goings-on in Arizona, the report does propose dropping altogether the restriction on paying for referrals housed in Rule 7.2(b).

The Arizona report also contains an Opposition Statement, written by a member of the Arizona task force who also happens to sit on the Arizona Court of Appeals. In short, Judge Swann’s Opposition Statement can be summed up as seeing the proposal to scrap Rule 5.4 as a cash grab by the legal profession wearing the cloak of concern with access to justice. Perhaps the strongest point Judge Swann makes is how badly the judicial system itself is in need of reform:

Though the current rules do an excellent job of implementing the “Cadillac” system of trial by jury and cutting-edge discovery techniques, they are completely ineffective at offering a simple path to dispute resolution for self-represented litigants, and they offer no streamlined procedures for small cases. The complexity of the system – indeed the very need for legal services in many cases – is a problem of our own making. I respectfully submit that the Task Force should have directed its attention to systemic reforms, and not to finding ways to direct even more resources to an already-too-resource hungry system. If the court system is too complex for the average citizen, then we must create a simpler and more efficient system – not new industries that will continue to consume the public’s money.

With its built-in “dissent,” the Arizona report really does frame the issues quite appropriately in terms of the nature of the choices that are out there for what must or should or will happen next both in Arizona and elsewhere.

This coming weekend, this general topic will be one of several that Merri Baldwin and I will be speaking on at an event for the PilotLegis Annual Member Conference in Washington, D.C.

Later this year, what has been going on and what comes next will be the focus of the 2019 Ethics Roadshow. We’re calling it “What to Expect When You’re Expecting (Fundamental Changes in the Legal Profession).” I’ll be doing it live in Memphis, Nashville, Chattanooga, and Knoxville over the course of two weeks in December 2019.

Can Utahp Arizona?

I know. I’m either: (a) such a sucker for Utah-centric wordplay; (b) a lame, repetitive sort of humorist; or (c) both a and b.

But nevertheless today’s post is really important – at least the subject matter of it is – and so it is being designed to try to be short and sweet and get you, Dear Reader, to go read the source material.

I wrote about Arizona’s efforts in reshaping the legal regulatory landscape a couple of weeks ago. I emphasized how much faster it was moving than California. But Utah has gotten to something of the “finish line” on a very bold regulatory initiative even sooner.

This week it was announced that the Utah Supreme Court unanimously voted to approve the August 2019 Report and Recommendations from the Utah Work Group on Regulatory Reform.

So, for some light reading during this holiday weekend, I offer you the link below to download the Utah report itself – which was titled “Narrowing the Access-to-Justice Gap by Reimagining Regulation.”

To try to immediately pique your interest in reading it, here is the concluding paragraph:

Decade after decade our judicial system has struggled to provide meaningful access to justice to our citizens. And if we are to be truly honest about it, we have not only failed, but failed miserably. What this report proposes is game-changing and, as a consequence, it may gore an ox or two or upend some apple carts (pick your cliché). Our proposal will certainly be criticized by some and lauded by others. But we are convinced that it brings the kind of energy, investment, and innovation necessary to seriously narrow the access-to-justice gap. Therefore, we respectfully request that the Supreme Court adopt the recommendations outlined in this report and direct their prompt implementation.

For what it is worth, I also offer for you the four most important takeaways (in my opinion) about this development:

  1. The framing of the current legal landscape using the term “Age of Disruption,” is very good. It is not only quite accurate but a compelling choice of words.
  2. The Utah report manages to adroitly articulate a number of very important points about the fact that the need for regulatory reform and the problem of the lack of true access to justice in the U.S. are both intertwined with, and independent of, each other. The need for regulatory reform exists whether it will ultimately result in true access to justice or not. The need to strive toward true access to justice exists and must be addressed even if we don’t manage true regulatory reform. The report also says out loud what is often not said — that the lack of access to justice is not the fault of lawyers because it is not a problem that can be made to go away simply by volunteering more or donating more.
  3. I don’t know, however, that it helps to move any needles to be quoting Heraclitus exactly, given that he is most famously known for cosmology. While the point about “Life is flux” is well and good in terms of making the overall point that the only constant in life is change. I think the more appropriate reference for that point in the Age of Disruption is something better than an obscure 5th Century Greek. Probably would have been better to go with a more modern approach and use a variation of the message spoken by a well-known character in Grey’s Anatomy. (I’m largely kidding about this and it really doesn’t deserve to be treated as one of four takeaways. Having only “three” most important takeaways seemed cliché.)
  4. The Utah approach does the two things that, I believe, have to be done hand-in-hand to address this problem. Both freeing up lawyers to compete by paring down certain aspects of the ethics rules, AND establishing regulation to address those who are going to be out there doing the delivery of legal services but who are not lawyers. And, I happen to think that doing so through the “regulatory sandbox” approach Utah will pursue is the path that makes the most sense for that second piece.

Okay, enough about what I think about it. Put it in your reading pile, find a relaxing spot this weekend and read it for yourself and see what you think.

Don’t sleep on Arizona

We’ve (in that creepy royal “we” sort of way) now dedicated two posts to discussing the ATILS proposal coming out of California, but California is certainly not the only state working on reform. In fact, while it may be the biggest, it is not the state offering the boldest reforms, and it also isn’t the fastest in the race by far.

While I did not manage to make my travel work to stay in California for the public hearing on the ATILS proposals, one thing I did learn (along with others in an audience) about it is that before California actually does anything with respect to rule changes there would have to be a second task force put together that would actually craft rule proposals and other specifics.

The state that – at the moment at least – appears to be proposing the boldest reforms when it comes to the future of legal ethics and is doing so at a much quicker pace is Arizona. The Arizona Supreme Court has created its own Task Force on Delivery of Legal Services. You can review as much or as little of the happenings to date of this Task Force by spending some time perusing what is available at this link.

That task force meets again on August 14, 2019 but a review of the minutes of some of their prior meetings will tell you that the Task Force has already approved two revisions that it would be a bit of an understatement to simply call bold:

  • Included within a series of changes to the Arizona advertising rules spurred to some extent by the original APRL proposal for advertising reform and the recent ABA Model Rules revisions, the Arizona Task Force has approved the deletion of RPC 7.2 in its entirety.
  • The Task Force also appears to have approved the deletion of RPC 5.4 altogether (what the various minutes refer to as “Option 3”) so as to open wide the doors to partnerships between lawyers and nonlawyers and financial investment in law firms. In order to make certain that the requirements for lawyers to maintain professional independence are not lost, however, revisions are being made to other rules including comments to RPC 1.7 to highlight the issues.

The Task Force is also moving forward with a proposal to allow nonlawyers to provide certain limited legal services in a fashion that is similar to the concept of LLLTs adopted in a few other jurisdictions.

The Arizona Task Force is also working on evaluating what form of entity regulation may be required or desirable to address the fact that the regulators with jurisdiction to preside over complaints against lawyers and enforce the ethics rules against lawyers would not otherwise have authority over those not licensed to practice law.

So, at the pace Arizona is moving along, it is quite possible that, by as soon as early 2020, there could be a state out there in which there are no limitations on financial investment in law firms (or solo lawyer shops), no limits on what can be accomplished through lawyers partnering with people from other disciplines and backgrounds, and no restrictions on the ability of a lawyer to share compensation received from a client with someone who assisted in delivering that client to that lawyer so that the lawyer could serve the client’s legal needs.

California dreaming.

As promised, I’m not done writing about the ATILS initial recommendations that have been put out for public comment in California.

In fact, I’m here in San Francisco for the next few days at the APRL meeting where there will also be a public forum about the recommendations on August 10.

The public comment period continues until September 23, but if the sentiment that gets expressed at the hearing is anything like the feedback during the public comment period, there may be pitchforks and torches.

It should come as no surprise to those paying attention but California lawyers are scared and uninterested in embracing reform of the way legal services are delivered. While I cannot find anywhere online to actually read the comments that have been submitted so far, you can access something of a spreadsheet here that is a tally of favorable or opposed submissions. People so far even have overwhelmingly commented against doing the easy stuff I mentioned in my prior post.

Nevertheless, let’s talk about a piece of the ATILS recommendation because I still think reform has to happen … one way or another.

The piece I want to talk about today is the proposed recommendation about changing RPC 5.4 in terms of prohibiting partnerships between lawyers and non-lawyers. This is an issue that the APRL Future of Lawyering project is also tackling but California has more quickly made tangible proposals. They’ve done so in the alternative offering a proposed recommendation 3.1 and an alternative proposed recommendation 3.2.

3.1 – Adoption of a proposed amended rule 5.4 [Alternative 1] “Financial and Similar Arrangements with Nonlawyers” which imposes a general prohibition against forming a partnership with, or sharing a legal fee with, a nonlawyer. The Alternative 1 amendments would: (1) expand the existing exception for fee sharing with a nonlawyer that allows a lawyer to pay a court awarded legal fee to a nonprofit organization that employed, retained, recommended, or facilitated employment of the lawyer in the matter; and (2) add a new exception that a lawyer may share legal fees with a nonlawyer and may be a part of a firm in which a nonlawyer holds a financial interest, provided that the lawyer or law firm complies with certain requirements including among other requirements, that: the firm’s sole purpose is providing legal services to clients; the nonlawyers provide services that assist the lawyer or law firm in providing legal services to clients; and the nonlawyers have no power to direct or control the professional judgment of a lawyer.

3.2 – Adoption of an amended rule 5.4 [Alternative 2] “Financial and Similar Arrangements with Nonlawyers” which imposes a general prohibition against forming a partnership with, or sharing a legal fee with, a nonlawyer. Unlike Recommendation 3.1, the Alternative 2 approach would largely eliminate the longstanding general prohibition and substitute a permissive rule broadly permitting fee sharing with a nonlawyer provided that the lawyer or law firm complies with requirements intended to ensure that a client provides informed written consent to the lawyer’s fee sharing arrangement with a nonlawyer.

Now, my quibbles with either proposed amendment to RPC 5.4 would be at the margins. I think what is missing from the second alternative is that also there would need to be protection that the nonlawyer have no power to direct or control the professional judgment of a lawyer. As to the first alternative, my only real quibble is that I think the second alternative is better on substance.

I understand why a lot of lawyers would get queasy at the second alternative, but I’m at something of a loss to see how – other than based purely on either pure self-interest or “guild” protection – lawyers can wield torches in response to the first alternative. Very weirdly there has (so far) been more opposition to 3.1 than to 3.2.

To some extent recommendation 3.1 is not strikingly different than what D.C. already permits and it embraces the reality of what is (or at least with respect to Avvo “was”) already happening online when it comes to business providing marketplaces to pair willing attorneys with interested clients.

Loosing a big (maybe?) idea into the world.

I had originally promised myself that the articulation of this thought would debut here at my blog. I almost managed it but I raised this notion in the real world lately among some very bright lawyers. So, before I do it again somewhere other than the Internet, I’m following through to put this idea out through this platform for anyone who wishes to chew on it to chew on it.

The only background that I think you need (even if you are not a regular reader of this space) is that there is much activity going on across the country in terms of real efforts at proposed change to the way lawyer ethics rules address certain topics that are largely viewed as barriers to information about the availability of legal services.

Two of the potentially most important, and relatively fast-moving, endeavors are the work of the California Task Force on Access Through Innovation of Legal Services, the APRL Future of Lawyering project. But there is movement happening in a number of different states to propose changes to the ethics rules to loosen, if not outright delete, restrictions on monetary and other arrangements between lawyers and people who are not lawyers, that are currently placed in rules patterned after ABA Model Rule 5.4 (generally prohibiting fee-sharing with people who are not lawyers) and 7.2 (restricting the ability of lawyers to make payments to others for referrals to, or recommendations of the lawyer).

It is anticipated that there will be some significant level of outcry over any such proposed changes on the grounds that removal of such rules erodes the protection against lawyers having their exercise of independent professional judgment interfered with. Most every time I engage with anyone on that topic, I find myself making the point that, even without those provisions, the rules still require lawyers to maintain their independent professional judgment.

But, here’s the idea I am letting loose into the world: perhaps we should make that obligation more prominent. At present, outside of any particular context, the only rule that plainly starts down this path is the first sentence of Rule 2.1 which reads: “In representing a client, a lawyer shall exercise independent professional judgment and render candid advice.”

Should we, as part of the coming necessary reform of the ethics rules, revise the first rule? Perhaps like this?

Rule 1.1: Competence and Independence

(a) A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.

(b) A lawyer representing a client shall not permit any person to direct, regulate, or otherwise interfere with the lawyer’s exercise of independent professional judgment.

If that rule existed, then in all places in which restrictions considered to be barriers to access to legal information but which are justified because of the risk to lawyer independence could be replaced with a pointer back to the lawyer’s obligation under Rule 1.1(b).