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.