For years there has been much gnashing of teeth in the legal profession over what to do about the 80% of the public who can’t afford legal services, but very little action. One solution bandied about, but hitherto rejected by the American Bar Associations (ABA) and state rules of professional conduct, is allowing people who are not lawyers (nonlawyers) to own and exercise control over law firms – known as alternative business structures (ABS). Proponents argue that the law firm model has failed to deliver reasonably priced legal services and it is time to introduce some competition into the ossified legal marketplace. In their view, competition and investment in law firms will lead to technological innovations which will result in increased efficiency and lowered costs. Opponents are skeptical that this rosy vision of the future will come to pass, and fear that ownership of firms will just compromise lawyers’ duties of loyalty and confidentiality, and hinder their ability to provide competent services.
The idea of creating a new business structure to compete with law firms has been controversial in the United States since Australia introduced the concept in 2001. Though England and multiple European countries have jumped on the ABS bandwagon, the American Bar Association, basically a lawyers’ guild, has firmly opposed to this idea, viewing it as a threat to the law firm business model and the livelihoods of its members. They quite rationally fear that corporations, particularly the big four accounting firms, will swoop in to steal their business, usher in the Turbotaxification-of-law, reduce their profit margins, and drive all but the largest law firms out of business. It is so controversial that the ABA Commission on the Future of Legal Services, which issued the 2016 ABA Report on the Future of Legal Services in the United States, was criticized by its members for even discussing the subject of ABS. Naturally, the report’s final recommendation was that the future…be the same as the past! It did, however, timidly suggest that states explore ABS to see how they could be useful.
Despite the failure of the ABA to endorse ABS, states began to take action. In 2018, California, Utah, and Arizona formed task forces to explore innovation such as ABS to attempt to meet the legal needs of their citizens. Bowing to inevitability, on February 17, 2020, the ABA softened its stance toward ABS in Resolution 115. Without mentioning ABS specifically, it encouraged states to “consider regulatory innovations that have the potential to improve the accessibility, affordability, and quality of civil legal services…”
While California dithered and Utah indecisively established a “regulatory sandbox” for experimentation, Arizona rushed forward to be the first state to allow alternative business structures to operate in the state. On August 27, 2020, the Arizona Supreme Court announced the repeal of the ethical rules that barred nonlawyers from having an economic interest in a law firm and the creation and regulation of alternative business structures. Starting January 1, 2021, alternative business structures, entities that include “nonlawyers who have an economic interest or decision-making authority” will be allowed to operate if licensed under the new regulatory scheme, it employs at least one licensed Arizona lawyer, and its legal services are provided by people authorized to do so.
Will other states follow Arizona’s lead? Will alternative business structures squeeze out law firms, or will law firms just register to be alternative business structures? Will they actually lower costs and increase access to legal services? Will the Big Four accounting firms figure out how to Turbotaxify large areas of the law? And, most importantly, what does this mean for the future of law libraries and law librarians? Well, glad that I asked, it is certainly quite obvious to anyone that thinks about it for a few moments that in the future we will….hahaha just kidding…I don’t know. Will other states follow Arizona’s lead? Will alternative business structures squeeze out law firms, or will law firms just register to be alternative business structures? Will they actually lower costs and increase access to legal services? Will the Big Four accounting firms figure out how to Turbotaxify large areas of the law? And, most importantly, what does this mean for the future of law libraries and law librarians? Well, glad that I asked, it is certainly quite obvious to anyone that thinks about it for a few moments that in the future we will….hahaha just kidding…I don’t know. There does seem to be a consensus that, in the coming years, nearly every industry and profession will continue to face an onslaught of technological disruption, competition, automation, outsourcing, layoffs, etc. in the coming years.
Perhaps, for the legal industry and those employed in it, ABS will turn out to be just a small part of the total eventual disruption. The sky hasn’t fallen yet in England, which introduced ABS in 2007. It is true that they have put pressure on smaller law firms, the number of which has fallen each year. However, in 2016, 41% of law firms were registered as ABS, suggesting that many traditional law firms adapted to the new regulatory landscape and perhaps even came to prefer the new model?
Perhaps ABS is nothing to fear at all. It seems quite possible that disruption of the legal industry will lead to a better industry. After all, it could hardly get worse for the 80% of the public who lack access to legal services. And if the Big Four or whoever succeed in mass market Turbotaxification of the law, it seems likely that the addition of so many new customers would increase employment opportunities for many legal professionals. I suppose only time will tell how this new innovation will impact the U.S. legal profession, lawyers, and us law librarians. If anyone has a prediction, please comment below!