Ch 21 The Two Commissions: Different or the Same?

The Two Commissions: Different or the Same?

Goal 1 of the ABA is to serve its members and such changes would not. Paula Hudson Holderman

There is no question that the work of the Futures Commission was prolific. In addition to releasing issues papers and reports, it also organized or fostered the organization of a “National Summit on Innovation in Legal Services”[1] and local “grassroots meetings.”[2] While the topics of those meetings varied, their principal focus was to discuss the obstacles that individuals and businesses face in obtaining legal services and to share ideas and experiences with respect to existing and proposed innovations in the delivery of legal services and in legal education (for example, the use of technology to streamline court processes and/or assist unrepresented litigants,[3] prepaid legal service plans,[4] limited scope legal services,[5] inclusion of technology-focused courses in a law school curriculum,[6] and a single point of entry into the justice system[7]…). The Commission also organized webinars on comparable topics, including one that juxtaposed Gillian Hadfield, one of the most prominent advocates of alternative structures, with Lawrence Fox, one of the most prominent opponents.[8] The Commission’s website contains the webinars as well as videos of a number of presentations—considered as a whole, they contain a wealth of information and insight. While the 20/20 Commission could not be described as inactive, the extent and the scope of its meetings and other activities pale in comparison to those of the Futures Commission.

Further, the Resolution proposed by the Futures Commission and adopted by the House of Delegates is remarkable. As noted above, it expressly recognizes the existence of “non-traditional legal service providers.” Instead of criticizing the quality or utility of the services of non-traditional legal services providers and/or contending that they engage in the unauthorized practice of law, the ABA has done an about-face and expressly accepts them. And it goes further: it provides guidelines to state courts with respect to how to regulate them and, in doing so, provides the ABA’s implicit permission for state courts to regulate them. In contrast, while the 20/20 Commission did make a number of recommendations to the House of Delegates,[9] all of which were accepted, none of them could be or, indeed, have been described as “remarkable.” (To the contrary, Laurel Terry argues that the 20/20 Commission missed an opportunity because it failed to ask the “big picture” question of “whether, and how, lawyer regulation and the ABA should adapt in light of global developments”[10]).

But as remarkable as the Resolution proposed by the Futures Commission and adopted by the House of Delegates is, it is hardly groundbreaking. It doesn’t create a path for the creation of non-traditional legal service providers, as they have already been created (albeit in highly limited forms given the restrictions of Model Rule 5.4, which, again, remain in place). It doesn’t alter the quality or the usefulness of the services of non-traditional legal service providers, nor does it have any bearing on the extent to which their activities may or may not constitute the unauthorized practice of law (although the Resolution may very well dampen enthusiasm for future lawsuits by state and local bar associations in that regard). While certainly state courts will find the ABA’s suggested guidelines on how to regulate non-traditional legal service providers to be interesting, and quite likely also useful, the state courts did not need such guidelines from the ABA; indeed, the Supreme Court of Colorado did not wait for them in order to develop its own.[11] Finally, at no point has any state supreme court required the ABA’s permission, implicit or not, to regulate anything. At least, on paper none has.

In fact, as remarkable as the work of the Futures Commission was, and as different it was from that of the 20/20 Commission, the two Commissions shared a number of fundamental commonalities. Those commonalties served to severely compromise the effectiveness as well as the integrity of the work of each Commission, especially (but not only) when considered in the context of alternative structures. Those fundamental commonalties most notably included these five:

1. Little, if any, consideration of entity regulation or compliance-based regulation

As discussed in detail above, in neither England and Wales nor Australia were alternative structures adopted in isolation of other regulatory considerations. To the contrary, in both places, they were adopted in the context of significant modifications to, if not a transformation of, the larger regulatory framework. While such modifications (or transformations) were comprised of a number of elements, two of the most essential were: (i) the adoption of a scheme to regulate entities in addition to individual lawyers, and (ii) a move away from proscriptive, rules-based regulation in favor of compliance-based regulation (also termed “proactive, management based regulation,” or, in England and Wales, “outcomes focused regulation”).

In the US as well as in Canada, a number of objections to alternative structures have been raised. While the objections vary in nature, many of them are in essence driven by a concern as to how alternative structures can be regulated, and, in particular (but not only), how they can be regulated to ensure compliance with ethical standards. Compliance-based entity regulation responds directly to that concern.

While the experiences of the Canadian provinces are not yet conclusive, they strongly indicate that the adoption of alternative structures in isolation of other regulatory modifications, and notably of these two essential ones, is nearly if not entirely impossible. In Ontario, alternative structures, as an isolated proposal, was simply too contentious and proved impossible to debate without provoking a myriad of strong emotions. In contrast, the (albeit as yet unfinished) experience of Manitoba and the other Prairie provinces demonstrates that when the discussion of alternative structures expressly recognizes that they are “intimately connected” with both entity regulation and compliance-based regulation, the resulting discussion can be productive rather than fruitlessly contentious and emotional. Finally, as the (also as yet unfinished) experiences of Nova Scotia and British Columbia demonstrate, the elements of entity regulation and compliance-based regulation can, in a first step, be discussed and adopted in a manner that is entirely divorced from alternative structures, and in isolation from them. In this manner, should either province decide at a later date to address the topic of alternative structures, much of the preliminary work needed to adopt them will already be done, and, especially, the concern as to how they will be regulated will already be addressed.

When the 20/20 Commission created Working Groups in February, 2010, it initially called one of them “Law Firm Regulation/Alternative Business Structures Working Group,”[12] or, alternatively, “Entity Regulation/Alternative Business Structures Working Group.”[13] At a meeting held in April, 2010, that Working Group reported back to the Commission that it had “initially decided to focus first on issues relating to law firm/entity regulation. It will also move forward contemporaneously with its study and analysis of developments relating to alternative business structures.”[14] However, the minutes of the Commission’s meetings (at least, the minutes that are available to the public) make no further mention of either law firm or entity regulation until a meeting held in February, 2011. The minutes of that meeting simply state that the Commission agreed with the Entity Regulation Subcommittee that “there was insufficient evidence” to proceed further with the development of a proposal regarding proactive, management based regulation. Instead, the Commission recommends that the Entity Regulation/Alternative Business Structures Working Group develop a White Paper on how to “help lawyers and law firms think more systematically about how to better serve clients.”[15]

There is nothing in the public record that sheds light on exactly what evidence the Commission considered in order to draw such a conclusion. Further, there is nothing in the public record suggesting that the recommended follow-up work was performed. In the minutes subsequent to this February, 2011 meeting, the relevant Working Group is referred to simply as the “Alternative Business Structures Working Group.”[16]

In its first (2014) Issues Paper, the Futures Commission included a single mention of “entity regulation and proactive risk-based management/compliance programs”[17] in its two-page list of about 35 questions. Of the more than 60 submissions that the Commission received in response, only three mentioned entity and/or compliance-based regulation in any meaningful way, two to briefly express support for each of them,[18] and one to remind the Commission that they can be adopted independently of alternative structures.[19]

After that, the Futures Commission itself did not mention compliance-based regulation again in any of its publicly available documents. It mentioned entity regulation just once more—in its December, 2015 Informational Report to the House of Delegates, in a list of the Commission’s ongoing work, it included a reference to “Ongoing discussion and study of additional regulatory opportunities, including but not limited to alternative business structures and entity regulation.”[20] (As discussed above, its Issues Paper Concerning Unregulated LSP Entities, the Commission uses the expression “entity regulation,” but it does so entirely divorced from the concept of the regulation of law firms as entities as well as from compliance-based regulation).

Based upon the publicly available documentation, it is clear that neither the 20/20 Commission nor the Futures Commission considered either entity or compliance-based regulation to be topics worthy of their focus. What is less clear is the extent to which they understood the importance of these topics in relation to alternative structures, as demonstrated first by the examples of England and Wales and Australia, and, later, by the examples of the various provinces of Canada. Either way, for each Commission, its failure to focus on these prerequisite topics guaranteed that it would be unable to address the topic of alternative structures in any productive manner.

2. Continued abdication by those who hold de jure power to regulate legal services (state supreme courts) in favor of the de facto (or quasi[21]) regulatory power exercised by the ABA [22]

Very generally speaking, it is the state supreme courts that hold the de jure authority (that is, the authority accorded by law) to regulate the legal profession, if not the legal services market as a whole (in many states, the supreme court shares that authority with a unified or integrated bar association).[23] From time to time the ABA reasserts that the authority to regulate lawyers, if not the legal services market as a whole, not only lies with state supreme courts or the judicial branch of government, but also that it should lie there.[24] The two Commissions repeated these assertions: The 20/20 Commission’s “Preliminary Issues Outline” opened with the words “In the United States, the highest court of each state and the District of Columbia has the authority to regulate lawyers within its borders.”[25] And in its Issues Paper Concerning New Categories of Legal Services Providers, the Futures Commission made a point of explaining that the paper’s concept of authorizing and regulating nonlawyer legal service providers “is consistent with the longstanding ABA policy in support of state-based judicial regulation of the legal profession.”[26]

However, while the pertinent legal texts might place this regulatory power in the hands of the state supreme courts (and while the ABA might from time to time repeat the mantra that it does), the reality of how the power is exercised is entirely different. As discussed in part I, state supreme courts are highly deferential to the positions taken by the organized bar, and, in particular, to the positions taken by the ABA House of Delegates.[27] It is rare for a state supreme court to adopt a regulatory measure that was not proposed to it, if not directly by the national organization of the ABA, then indirectly through a state or local bar association, acting at the state level on the behest of the ABA. It is equally rare for a state supreme court to not adopt the regulatory measures that such bar associations do propose to it. In this manner, state supreme courts effectively abdicate their regulatory power to the ABA and to the state and local bar associations (again, for the most part acting at the ABA’s behest).[28]

Specifically in relation to the work of the 20/20 and the Futures Commissions, some documents evidence this abdication of regulatory power:

  • In a written submission dated July 5, 2010, Sally Evans Lockwood, Director of Admissions for the Office of Bar Admissions of the Supreme Court of the State of Georgia, wrote to the 20/20 Commission to acknowledge that she was aware that the Commission was considering certain proposals on the topic of foreign lawyers practicing in the US, and to assure the Commission that the State Bar of Georgia and well as the Georgia Supreme Court not only had already adopted prior ABA proposals in this regard, but also had already set in motion the procedure required to adopt the anticipated new ones.[29]
  • In a written submission dated October 4, 2012, Stephanie S. Libhart, Assistant Director of the Pennsylvania Interest on Lawyers Trust Account (IOLTA) Board of the Supreme Court of Pennsylvania wrote to the 20/20 Commission to “encourage” it to clarify the wording of a particular proposal under consideration by the Commission in order to assure that the proposal did not, presumably unintentionally, “interfere” with some of the state’s existing practices—practices that, questions of wording aside, Libhart made a point of explaining already complied with the spirit and intention of the proposals in question. (The proposal related to the attribution of the fees paid by out-of-state lawyers requesting temporary permission to appear on behalf of a client in that state, a procedure known as “Pro Hac Vice Admission”).[30]
  • In a written submission dated December 21, 2015, Paul Burgoyne, President of the National Organization of Bar Counsel (NOBC, whose website describes it as an organization “whose members work in the regulation of the practice of law.”[31]), wrote to the Futures Commission to state that it “takes no position” with respect to the question of new categories of legal services providers that was under consideration by the Commission. Instead, he wrote “it is appropriate for the ABA to play a leadership role in evaluating and guiding the manner in which the delivery of legal services will be regulated so that all US jurisdictions can make informed decisions.” In that context, he was writing to offer up the NOBC’s members as an “invaluable resource” for the Commission, as “eager to assist in all aspects of the ABA’s work to improve judicial regulation of the practice of law.”[32] (This comment is particularly ironic given that in its August, 2016 Final Report, the Futures Commission kicked responsibility for this issue to the courts).[33]
  • At its Midyear Meeting on February 3, 2016 (just a few days before the ABA House of Delegates adopted the Futures Commission’s proposal with respect to regulatory objectives), the Conference of Chief Justices (CCJ) adopted “Resolution 9: Recommending Consideration of ABA Model Regulatory Objectives for the Provision of Legal Services.” (By way of reminder, the CCJ brings together the highest judicial officer in each state, typically the Chief Justice. The Chief Justice presides over the state’s Supreme Court). In this Resolution of its own, the CCJ begins by explaining that the Futures Commission “concluded that the development of regulatory objectives is a useful step to guide state supreme courts and bar authorities as they assess the existing regulatory framework and identify and implement regulations related to legal services beyond the traditional regulation of the legal profession.” The Resolution then repeats the list of Model Regulatory Objectives that had been developed and proposed by the Future Commission, and recommends that the members of the CCJ (that is, state supreme court justices) consider the objectives in the manner intended by the Commission (that is, “as a means to help assess the state’s existing regulatory framework and to help identify and implement regulations related to legal services beyond the traditional regulation of the legal profession”[34]).

In the documents described above, state judicial authorities, acting either individually (in these specific cases, the Supreme Courts of Georgia and of Pennsylvania), or collectively through the NOBC and the CCJ, demonstrate in an unequivocal manner their failure to exercise their regulatory powers, instead deferring to the processes and the “policy” decisions of the ABA. The Supreme Court of Georgia wrote for no other reason than to affirm its past and future compliance with ABA dictates, without questioning those dictates in any manner, or even appearing to contemplate that they might question them. The Supreme Court of Pennsylvania “encouraged” the ABA to amend its proposed text in order to not cause confusion with existing Pennsylvania practices—such an “encouragement” would be unnecessary if the Supreme Court of Pennsylvania considered itself to be free to amend, or, indeed, to not adopt at all, ABA dictates. The NOBC all but bowed before the ABA, in stating that it “takes no position” but that, instead, “it is appropriate for the ABA to play a leadership role.” Finally, the CCJ, in recommending state supreme courts to consider the ABA’s regulatory objectives, underscored the fact that it failed to develop any of its own (as did each of the other state supreme courts other than that of Colorado).

These documents (among others) evidence that, regardless of what the applicable legal texts may state and that the ABA may claim to the contrary, much of the real power to regulate the legal profession as well as legal services in the US lies principally with the ABA. While state supreme courts and other state judicial authorities have the de jure power, for the most part they fail, for whatever reason(s), to exercise it, leaving a regulatory vacuum open for the ABA to fill. However, in filling the vacuum, the ABA hides behind assertions that the power lies with state judicial authorities. In doing so, the ABA is able to deflect any argument that it should conduct itself as a true and effective regulatory authority—one that acts in a fully transparent manner and is accountable not to its members or to state and local bar associations, but to the public as a whole.[35] This abdication on the part of state judicial authorities combined with this duplicity on the part of the ABA have a number of consequences, two of which are discussed immediately below.

(The 20/20 Commission was open about this duplicity: Even if its Preliminary Issues Outline opened with the words “In the United States, the highest court of each state and the District of Columbia has the authority to regulate lawyers within its borders,” the 20/20 Commission went on to repeat on multiple occasions that in its work it adhered to three “guiding principles,” one of which was “maintaining a strong, independent, and self-regulating legal profession”[36]).

3. Lack of transparency

The 20/20 Commission reported that, at its first meeting in September, 2009, “the Commission agreed that transparency…would be crucial.”[37] On several later occasions the 20/20 Commission repeated an intention to act with transparency.[38] However, in practice, the 20/20 Commission barely made a pretense of transparency. A prime example is the Commission’s decision making process with respect to alternative structures. As described in detail above, the Commission made a series of decisions in their regard without ever explaining its decision-making criteria and without providing any explanation of its decisions beyond statements such as “these subjects are better suited for a White Paper,”[39] “there was insufficient evidence to proceed further,”[40] and “the case had not been made.”[41] While the Commission released minutes for some of its meetings, it failed to do so for a number of others, and the ABA even refused to provide them in response to a specific request.

Kenneth Grady, CEO of SeyfarthLean Consulting, described the ABA in general, and the work of the 20/20 Commission in particular, in this manner:

I have trouble concluding the ABA is following [a transparent, fact-based and unbiased] process. The materials I have read do not include standards for analyzing the issue, data about the performance of schemes with or without ABS, or descriptions of the data needed to decide the issue. Nevertheless, the position of the ABA is that “the case for making changes has not been made.”[42] …  Put simply, the public cannot understand what would permit the ABA to permit ABS arrangements. This opaque process makes it difficult to build public trust and supports the perception that a decision on the issue will be made behind closed doors to a politics and emotion process.[43]

It is tempting to argue that the Futures Commission acted in a more transparent manner. Evidence of this could be found, for example, in the large amount of materials posted on the Commission’s website (videotaped presentations, webinar, written submissions,…) and the Commission’s efforts to facilitate a large number of what it termed “grassroots meetings,” which the Commission described as “local conversations [to] create new avenues for access to justice for all and open doors to new career opportunities for current and future lawyers.”[44]

However, a closer examination reveals that the Futures Commission was hardly more transparent than the 20/20 Commission. Examples of this include the Futures Commission’s failure to explain its reasons for deciding to propose regulatory objectives as opposed to any other proposal it could have made, especially given that its 2014 Issues Paper did not even mention them. Further, the limited information on the Commission’s website makes it impossible to fully understand the consultation process that the Commission followed with respect to the topic of regulatory objectives—based upon the information that is provided, it appears that only a small number of groups and individuals, namely ABA entities, state and local bar associations and a law school professor, were asked or even put in a position to be able to provide comments before the Commission submitted its Report to the House of Delegates. Another example of the Future Commission’s lack of transparency is that its prominently publicized May, 2015 “National Summit” was organized (with Stanford Law School) on an “invitation only” basis. At no point did the Commission publicly explain its criteria for selecting the persons who were invited to speak or to attend, nor was a list of attendees ever made public. Finally, and perhaps especially, none of the minutes of the Commission’s meetings has been made available to the public. Without them, it is impossible to have any insight into the processes the Commission followed or the decision-making criteria it applied. Especially it is impossible to critique them.

If the ABA were, as its website describes, nothing more than a “voluntary professional association” with a primary goal of “serving our members,” it would be difficult for anyone except the ABA’s members to criticize this lack of transparency. However, the ABA is much more than that—rightly or wrongly, it is our country’s de facto regulator of the legal profession and of legal services. For this reason, its lack of transparency can and must be severely criticized. As discussed in detail in part I, transparency is an essential component under any definition of “good governance.” Further, the lack of transparency of this “quasi-regulator” flies in the face of the international commitments that the US has made and notably its commitment under the United Nations 2030 Agenda for Sustainable Development to develop “effective, accountable and transparent institutions at all levels.”[45]

4. Lack of empirical or evidence-based research

The lack of any empirical or evidenced-based research was noted in comments submitted comments to both Commissions. For example, Douglas Richmond stated that the 20/20 Commission “has gathered absolutely no evidence that non-lawyer ownership in firms…is desired by any material percentage of United States lawyers…multiple anecdotes are not evidence.”[46] Richard Thies stated that the 20/20 Commission did not have “any evidence that there is a necessity for these changes other than the competition of the marketplace.”[47] A few years later, the Los Angeles County Bar Association asserted that the Futures Commission “must frame a data-driven proof of concept that meets the Commission’s stated ABS goals.”[48] The Defense Research Institute argued “there is no empirical evidence that greater access to justice has been achieved in jurisdictions that allow [for alternative structures].”[49]

The 20/20 Commission did not expressly acknowledge the calls for additional evidence and research, nor did it otherwise address the topic. In contrast, the Futures Commission did acknowledge it, stating that “ongoing, systematic research is an essential component of improving the quality and availability of legal services.”[50] At the same time, the Futures Commission lamented, “systematic research on the current delivery of legal services—especially services for ‘ordinary individuals’—is strikingly limited,”[51] and that “limited data has impeded efforts to identify and assess the most effective innovations in legal services delivery.”[52] However, the Futures Commission did not recommend that the ABA itself or other bar associations take steps to fill this gap, in whole or in part, by conducting its own research, because “it would be impossible” for them “to explore every potential innovation. Instead, the Commission recommended that the ABA’s role be confined to the collection, organization and centralization of ABS-related information and data.[53] As for who should actually conduct the research, the Futures Commission observed that “fortunately, academic and federal governmental interest in ‘access to justice’ research is increasing.” As a general matter, the Commission stated, it “strongly supports ‘evidence-based’ assessment of both new and existing forms of legal services delivery.”[54] In particular, “where ABS is allowed, evidence and data regarding the risks and benefits associated with these entities should be developed and assessed.”[55]

5. Treatment of certain questions—and one in particular—as taboo

During the course of their work, both the 20/20 and the Futures Commissions posed a large number of questions. The questions were by no means limited to the topic of alternative structures, but also addressed many other topics. For example, the 20/20 Commission asked questions about the conditions under which foreign lawyers should be allowed to practice in the US, whether virtual law firms are adequately regulated, the rules that should govern a lawyer’s involvement with alternative litigation financing, the ethical issues that arise from lawyers’ use of internet based client development tools, and the extent to which lawyers require guidance in their use of technology, notably to assure the confidentiality of client information. Examples of the questions the Futures Commission asked include how the legal profession can better serve clients and potential clients, what are the most important problems in the delivery of legal services and how can those problems be addressed, whether certain persons who do not have a JD and are not fully licensed lawyers should be permitted to provide limited legal services, and how can the legal profession address diversity and inclusion in the recruitment and retention of practicing lawyers.

Having posed those questions, each of the Commissions engaged in a consultation process in order to seek and discuss responses. The 20/20 Commission’s process was relatively closed, in that it consulted nearly exclusively with members of the legal profession: other ABA entities, state and local bar associations, judges, law school professors, and individual lawyers. In comparison, the Futures Commission was slightly more open in that it also invited persons it deemed to be “innovators”[56] to make presentations and make written submissions—that group, again, was composed principally of lawyers but also included a small number of nonlawyers (Colin Rule, Co-Founder and COO of Modria,[57] John Suh, CEO of LegalZoom,[58] Richard Barton, Co-founder and Executive Chairman of Zillow,[59] and Mark Britton, CEO of Avvo[60]).

Could the consultation process conducted by either Commission be described as “extensive?” That could be debated, both in regards to the questions each Commission posed and the persons and organizations it involved in its search for responses. Regardless of the outcome of that debate, there is at least one fundamental question that neither Commission dared to pose, and certain persons and organizations that neither dared to involve in the consultation process—persons who in all likelihood would have raised that question as well as offered their responses to it.

That question is this: to what extent does the role the ABA and state and local bar associations play in excluding nonlawyers, be they individuals or nonlawyer-owned organizations, from the legal services market violate unfair competition and antitrust laws and policies?

Concerns about the anti-competitive or antitrust nature of certain actions and policies of the ABA and of state and local bar associations had been raised well before the 20/20 Commission was convened in 2009. Examples include:

  • The Federal Trade Commission (FTC) and the Department of Justice, who, on a large number of occasions over a period of decades,[61] have opined that practice rules proposed by bar organizations, notably proposed rules that define the practice of law, “unduly restrain competition” with the result of “forc[ing] consumers to pay increased prices.” [62]
  • The American Antitrust Institute (AAI), who, as far back as 2000, argued that the ABA’s repeated refusal to lift its ban on multidisciplinary practices “raise[s] serious issues of our national policy favoring competition and consumer choice, rising even to the level of a possible violation of the antitrust laws.”[63]
  • In 2003 (six years before he was appointed Chief Reporter for the 20/20 Commission and eleven years before he was appointed Vice Chair of the Future Commission), Andrew Perlman wrote that “the ABA’s structural rules—the rules that have the most to do with the business aspects of the profession—have emphasized self-protection and public image at the expense of more appropriate emphases.”[64] In a second article published in 2004, Perlman recounts a history, notably since the Great Depression, of bar associations engaging in economic protectionism, in that case specifically with respect to admission rules for out-of-state lawyers.[65]

In February, 2015, just a few months after the Futures Commission began its work, these already repeatedly raised concerns were raised again, this time by no less than the US Supreme Court, in its decision North Carolina Board of Dental Examiners v. FTC. In this case, the North Carolina dental board, consisting mostly of practicing dentists, took certain actions to keep non-dentists from offering teeth-whitening services in North Carolina. The FTC sued the dental board under federal antitrust laws, claiming anticompetitive conduct. However, the issue before the Supreme Court was not if the actions of the dental board were anticompetitive. Instead, the issue was whether the dental board was acting under a doctrine that would give it, as a “state actor,” immunity from claims of anti-competitive conduct in violation of federal antitrust law. The dental board claimed that is was a state actor and thus was eligible for such immunity, on the grounds that an act of the North Carolina legislature appointed the dental board as the “agency of the State for the regulation of the practice of dentistry.”[66] The Court, however, disagreed, stating that “active market participants cannot be allowed to regulate their own markets free from antitrust accountability” and that “prohibitions against anticompetitive self-regulation by active market participants are an axiom of federal antitrust policy.” Additionally, the Supreme Court stated “The question is not whether the challenged conduct is efficient, well-functioning, or wise… [t]he question is whether the State’s review mechanisms provide ‘realistic assurance’ that a [private party]’s anticompetitive conduct ‘promotes state policy, rather than merely the party’s individual interests.’”[67]

While this case involved the dental rather than the legal profession, the decision of the court is highly pertinent for the legal profession, and for legal services more generally. It places anti-competitive actions by any group of “active market participants”—such as bar associations—under intensified scrutiny.[68] Its relevance has not gone unnoticed by the ABA, which created a page on its website devoted exclusively to the case and the issues it raises with respect to legal services.[69] This page contains links to articles opining on those very issues. For example, acting as a guest columnist in Forbes magazine, Ken Friedman, Vice President of Legal and Government Affairs for LegalZoom, wrote:

The Court’s ruling recognizes that letting professionals enforce their own monopolies creates a “real danger” that they will act to further their “own interests,” rather than the public interest. These practices increase prices to the detriment of consumers while decreasing consumer choice. The Court recognized that the problem is far worse when the boundaries of the state-granted monopoly are not “clearly articulated and affirmatively expressed as state policy,” and the professionals are given the power to decide what is the “unauthorized practice” of their profession…

Bar associations across the country use their power to limit competition. For example, states prohibit law firms from including non-lawyer partners or accepting investment from non-attorneys. Bars justify these rules arguing they are necessary to maintain independence and lawyer loyalty to clients, but they cannot point to evidence of harm should a lawyer partner with an accountant, engineer, or outside investor. In the United Kingdom and Australia, where those rules have been relaxed, there have not been reports of such harm.

What this really boils down to is reversing actions by state bars that have blocked people from getting the legal help they need.[70]

A May, 2015 article appearing in the ABA Journal quoted Professor Deborah Rhode of Stanford Law School as follows:

[I]t is hard to characterize this decision as narrow…I think it signals the willingness of the court to look behind the facade of state-action doctrine to determine whether there is real anticompetitive activity benefiting the members [of the regulated group] …I think the legal profession needs to take a hard look at its own activities in the area of the unauthorized practice of law… It would be a good thing if it did so.[71]

In North Carolina Board of Dental Examiners v. FTC, the Supreme Court stated that “[t]he question is whether the State’s review mechanisms provide ‘realistic assurance’ that a [private party]’s anticompetitive conduct ‘promotes state policy, rather than merely the party’s individual interests.’”[72] The documents described in (2) above issued by the Supreme Courts of Pennsylvania and of Georgia and by the NOBC and CCJ evidence that, with respect to the regulation of legal services, it would be impossible for a state’s review mechanism to provide any kind of “realistic assurance” because, in fact, there is no state review mechanism to speak of—the regulators have abdicated their regulatory responsibilities to persons who can only be described as “active market participants.”

Of course, it is possible to disagree with these observations. For example, a counterargument might be asserted that it is state supreme courts that have the de jure right to regulate legal services, and at any moment they could simply choose to exercise greater oversight over the work of the ABA and state and local bar associations.

The question of whether or not, in the end, any one or more actions or policies of the ABA or any state or local bar association effectively does, in any final analysis, violate unfair competition or antitrust laws or policies, is an important one. But it’s not the focus of this discussion. The focus of this discussion is that both Commissions failed to raise the question. They failed to do so even though Judy Martinez, the Chair of the Future Commission, stated that “nothing is off the table,” even ideas that seemed too radical.[73] They failed to do so even though, over a period of many years, a number of persons and organizations, including Andrew Perlman (the Chief Reporter of the 20/20 Commission and the Vice Chair of the Futures Commission) and the US Supreme Court, had put the question on the table. Those persons and organizations had put the question on the table in a repeated manner and for legitimate and justified reasons. Yet, in the plethora of questions that both the 20/20 and the Futures Commissions posed, not one acknowledged this fundamental issue or attempted to initiate a discussion in its regard. Further, there is nothing in the public record demonstrating that in the course of their respective consultation processes either Commission sought the input of, for example, experts in antitrust and unfair competition from the FTC, the US Department of Justice,[74] or the AAI. They, presumably, would not have hesitated to put the question on the table, or to provide their responses to it.

To the contrary, on the home page of its website, the Futures Commission affirms that “The American Bar Association (ABA) is well-positioned to lead the effort to improve the delivery of, and access to, legal services in the United States.”[75] In December, 2015, ten months after the North Carolina decision, the Futures Commission repeated this assertion in its Informational Report to the House of Delegates,[76] and in August, 2016 it again repeated it in its Final Report.[77]

It is easy to understand why both Commissions chose to ignore the question. Indeed, back in 2004, Clementi predicted this choice, when he stated it is “particularly difficult for professional bodies that combine both regulatory and representative roles to deal with competition issues.”[78] Raising the question would have invited criticism of the organization itself. It might have placed into question the very legitimacy of the Commissions, and it could have led to a loss of some or all of the ABA’s de facto or quasi regulatory power. Very few organizations have the necessary courage to voluntarily initiate such discussions.[79] At the same time, however, the fact that the ABA fails to raise much less to address a question that is highly central to the debate of how to better deliver legal services demonstrates the incongruity, if not the absurdity, of entrusting the debate to the ABA. As long as there are highly relevant questions that the ABA regards as taboo, and as long as there are persons and organizations the ABA is not willing to involve in its consultation processes, out of fear that they might raise (and respond to) those taboo questions, both the effectiveness and the integrity of the debate are necessarily compromised.

This chapter is an excerpt from Modernizing Legal Services in Common Law Countries: Will the US Be Left Behind? To learn more about the book, please click here.

Notes

[1] ABA Commission on the Future of Legal Services, “National Summit on Innovation in Legal Services,” accessed March 20, 2017, http://www.americanbar.org/groups/centers_commissions/commission-on-the-future-of-legal-services/national_summit.html.

[2] ABA Commission on the Future of Legal Services, “Upcoming & Past Events,” accessed March 17, 2017, http://www.americanbar.org/groups/centers_commissions/commission-on-the-future-of-legal-services/events-new.html.

[3] Charles Harrington, “Customer Service and the Courts,” slides at: http://www.americanbar.org/content/dam/aba/images/office_president/charles_harringon_focus_on_the_client_slides.pdf and video presentation at: http://bcove.me/p38g7l0m.

[4] Keith McLennan, ABA Standing Committee on Group & Prepaid Legal Services and Group Legal Services Association, video presentation: http://bcove.me/ki6oyi77.

[5] Stephen R. Crossland, “Limited License Legal Technician Program,” slides at http://www.americanbar.org/content/dam/aba/images/office_president/stephen_crossland_programs_to_bridge_the_gap_slide.pdf and video presentation at: http://bcove.me/6wa30tz8.

[6] Andrew Perlman, “Innovation in Legal Education,” slides at: http://www.americanbar.org/content/dam/aba/images/office_president/andy_perlman_programs_to_bridge_the_gap_slides.pdf and video presentation at: http://bcove.me/ygsgfnp4.

[7] Alex R. Gulotta, video presentation at: http://bcove.me/kjkazo82.

[8] Gillian Hadfield and Larry Fox, “Regulating the Future Delivery of Legal Services,” webinar, http://bcove.me/la7z1w1b.

[9] See ABA Commission on Ethics 20/20, “House of Delegates Filings,” http://www.americanbar.org/groups/professional_responsibility/aba_commission_on_ethics_20_20/house_of_delegates_filings.html.

[10] Terry, “Globalization and the ABA Commission on Ethics 20/20,” 113.

[11] “[Draft] Regulatory Objectives of the Supreme Court of Colorado,” November 12, 2015, http://www.americanbar.org/content/dam/aba/images/office_president/supreme_court_of_colorado.pdf;

[12] ABA Commission on Ethics 20/20, “Minutes,” February 4, 2010, 9.

[13] ABA Commission on Ethics 20/20, “Minutes,” April 29, 2010, 7.

[14] Ibid.

[15] ABA Commission on Ethics 20/20, “Minutes,” February 10, 2011, 6-7.

[16] ABA Commission on Ethics 20/20, “Minutes,” April 15-16, 2011, 8-9; ABA Commission on Ethics 20/20, “Minutes,” June 13, 2011, 7.

[17] ABA Commission on the Future of Legal Services, “Issues Paper on the Future of Legal Services,” 3.

[18] Chas Rampenthal and James Peters (LegalZoom). Task Force on the Evolving Business Model of Law Firms.

[19] ABA Standing Committee on Professional Discipline.

[20] ABA Commission on the Future of Legal Services, “Informational Report to the House of Delegates,” 3.

[21] Laurel Terry describes the ABA as a “quasi-regulator.” Terry, “Globalization and the ABA Commission on Ethics 20/20,” 95.

[22] For a detailed discussion of the abdication of regulatory power by state supreme courts in favor of the ABA and other bar associations, see Snyder, Democratizing Legal Services, 199-206.

[23] See, for example, Judith L. Maute, “Global Continental Shifts in a New Governance Paradigm,” 30.

[24] See, for example, American Bar Association, “Lawyer Regulation for A New Century,” accessed March 20, 2017, http://www.americanbar.org/groups/professional_responsibility/resources/report_archive/mckay_report.html.

[25] ABA Commission on Ethics 20/20, “Preliminary Issues Outline,” November 19, 2009, 1, http://www.americanbar.org/content/dam/aba/migrated/ethics2020/outline.authcheckdam.pdf.

[26] ABA Commission on the Future of Legal Services, “Issues Paper Concerning New Categories of Legal Services Providers,” 1.

[27] See, for example, Barton, “The Lawyer’s Monopoly,” 3080-81.

[28] Benjamin Barton provides a detailed and interesting analysis of the extent to which state supreme courts abdicate their regulatory power and the multiple motivations they have to do so: Benjamin H. Barton, “An Institutional Analysis of Lawyer Regulation: Who Should Control Lawyer Regulation-Courts, Legislatures, or the Market?” Georgia Law Review 37 (2003): 1167-1250.

[29] Sally Evans Lockwood, Letter to ABA Commission on Ethics 20/20 Working Group on Inbound Foreign Lawyers, July 5, 2010, http://www.americanbar.org/content/dam/aba/administrative/ethics_2020/ethics_20_20_comments/supremecourtofgeorgiaofficeofbaradmissions_inboundforeignlawyersmemorandaandtemplate.authcheckdam.pdf.

[30] Stephanie S. Libhart, Letter to ABA Commission on Ethics 20/20, October 4, 2012, http://www.americanbar.org/content/dam/aba/administrative/ethics_2020/ethics_20_20_comments/pa_iolta_board_of_the_supreme_court_comments_pro_hac_vice_admission.authcheckdam.pdf.

[31] “Mission Statement,” National Organization of Bar Counsel, accessed March 20, 2017, http://www.nobc.org/index.php/about-us/mission-statement.

[32] National Organization of Bar Counsel, “Comments to ‘Issues Paper Concerning New Categories of Legal Services Providers,’” December 21, 2015, http://www.americanbar.org/content/dam/aba/images/office_president/lspcomments_national_organization_of_bar_counsel.pdf.

[33] Futures Commission Final Report, 6.

[34] Conference of Chief Justices, “Resolution 9: Recommending Consideration of ABA Model Regulatory Objectives for the Provision of Legal Services,” February 3, 2016, https://richardzorza.files.wordpress.com/2016/02/ccj-2016-res-9.pdf.

[35] Barton discusses the lack of public accountability by judges who regulate legal profession in his article “An Institutional Analysis of Lawyer Regulation,” 1200-1204. For a detailed discussion of the ABA’s lack of public accountability, see Snyder, Democratizing Legal Services, 212-213.

[36] See, for example: American Bar Association, “Message from the Co-Chairs: Message from Commission on Ethics 20/20 Co-Chairs Jamie S. Gorelick and Michael Traynor,” accessed March 20, 2017, http://www.americanbar.org/groups/professional_responsibility/aba_commission_on_ethics_20_20/about_us/message_from_the_co_chairs.html; ABA Commission on Ethics 20/20,” Informational Report to the House of Delegates, February, 2010 and February, 2011, both available at: http://www.americanbar.org/groups/professional_responsibility/aba_commission_on_ethics_20_20/house_of_delegates_filings.html; ABA Commission on Ethics 20/20 Working Group on Alternative Business Structures, “For Comment: Issues Paper Concerning Alternative Business Structures, April 5, 2011, http://www.americanbar.org/content/dam/aba/administrative/ethics_2020/abs_issues_paper.authcheckdam.pdf; Jamie S. Gorelick and Michael Traynor, “For Comment: Discussion Paper on Alternative Law Practice Structures,” December 2, 2011, http://www.americanbar.org/content/dam/aba/administrative/ethics_2020/20111202-ethics2020-discussion_draft-alps.authcheckdam.pdf. See also a manifestation of this duplicity in this paragraph contained in the Preamble to the Model Rules:

The legal profession is largely self-governing. Although other professions also have been granted powers of self-government, the legal profession is unique in this respect because of the close relationship between the profession and the processes of government and law enforcement. This connection is manifested in the fact that ultimate authority over the legal profession is vested largely in the courts… To the extent that lawyers meet the obligations of their professional calling, the occasion for government regulation is obviated. http://www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_professional_conduct/model_rules_of_professional_conduct_preamble_scope.html.

[37] ABA Commission on Ethics 20/20, “Outreach,” accessed March 20, 2017, http://www.americanbar.org/groups/professional_responsibility/aba_commission_on_ethics_20_20/outreach.html.

[38] ABA Commission on Ethics 20/20, “Preliminary Issues Outline,” 2; American Bar Association, “Message from the Co-Chairs: Message from Commission on Ethics 20/20 Co-Chairs Jamie S. Gorelick and Michael Traynor,” accessed March 20, 2017, http://www.americanbar.org/groups/professional_responsibility/aba_commission_on_ethics_20_20/about_us/message_from_the_co_chairs.html; ABA Commission on Ethics 20/20, “Report to the House of Delegates: Resolution 105A,” August, 2012, 10, http://www.americanbar.org/content/dam/aba/administrative/ethics_2020/2012_hod_annual_meeting_105a_filed_may_2012.authcheckdam.pdf.

[39] ABA Commission on Ethics 20/20, “Minutes,” February 10, 2011, 6.

[40] Ibid.

[41] ABA Commission on Ethics 20/20, “ABA Commission on Ethics 20/20 Will Not Propose Changes.”

[42] Kenneth Grady, Video Testimony to the ABA Commission on the Future of Legal Services, 1:15 to 1:54, February, 2015, http://bcove.me/x9hwfqsq.

[43] Ibid., 3:22 to 3:38.

[44] ABA Commission on the Future of Legal Services, “Legal Services Grass Roots Resources,” accessed March 17, 2017, http://www.americanbar.org/groups/centers_commissions/commission-on-the-future-of-legal-services/legal-services-grass-roots-resources.html.

[45]  Agenda for Sustainable Development,” 25.

[46] Douglas R. Richmond, “Discussion Paper on Alternative Law Practice Structures,” January 6, 2012, 1-2, http://www.americanbar.org/content/dam/aba/administrative/ethics_2020/ethics_20_20_comments/richmond_alpsdiscussiondraft.authcheckdam.pdf.

[47] Thies, Letter to the ABA Commission on Ethics 20/20, 3.

[48] Los Angeles County Bar Association, “Comment of the Los Angeles County Bar Association,” 3.

[49] DRI – The Voice of the Defense Bar, “Issues Paper Regarding Alternative Business Structures,” 2.

[50] Futures Commission Final Report, 18.

[51] Ibid., 5.

[52] Ibid., 18.

[53] Ibid., 43.

[54] Ibid., 18

[55] Ibid., 6.

[56] ABA Commission on the Future of Legal Services, “Informational Report to the House of Delegates,” 1-2, 6.

[57] Colin Rule, “Online Dispute Resolution: Expanding Access to Justice” (presentation to 2015 National Summit on Innovation in Legal Services, Stanford, California, May 3, 2015) http://www.americanbar.org/content/dam/aba/images/office_president/colin_rule_programs_to_bridge_the_gap_slides.pdf; video of presentation at: http://bcove.me/aysp906c.

[58] John Suh, “Democratizing Law” (presentation to 2015 National Summit on Innovation in Legal Services, Stanford, California, May 4, 2015), http://www.americanbar.org/content/dam/aba/images/office_president/john_suh_slides.pdf.

[59] Richard Barton, May 4, 2015 video of presentation available at: http://bcove.me/k5xf2812.

[60] Mark Britton, “Avvo: National Summit on Innovation in Legal Services” (presentation to 2015 National Summit on Innovation in Legal Services, Stanford, California, May 3, 2015) http://www.americanbar.org/content/dam/aba/images/office_president/mark_britton_challenges_to_innovation_slides.pdf; video of presentation at http://bcove.me/vz01uvx2.

[61] A list of links to such opinions is accessible at ABA Center for Professional Responsibility, “FTC Letter Opinions on the Unlicensed Practice of Law,” accessed March 20, 2017, http://www.americanbar.org/groups/professional_responsibility/resources/client_protection/ftc.html. See also, for example, Thomas R. Andrews, “Nonlawyers in the Business of Law: Does the One Who Has the Gold Really Make the Rules?” The Hastings Law Journal 40 (1989): 617-621.

[62] Federal Trade Commission and US Department of Justice, Letter to Kansas Bar Association, February 4, 2005, 1-2, https://www.ftc.gov/sites/default/files/documents/advocacy_documents/ftc-and-department-justice-comment-kansas-bar-association-concerning-proposed-definition-practice/v050002.pdf.

[63] American Antitrust Institute, “AAI Says Legal Profession’s Recommendations on Multidisciplinary Practices May Violate Antitrust Laws,” February 8, 2000, http://www.antitrustinstitute.org/content/aai-says-legal-professions-recommendations-multidisciplinary-practices-may-violate-antitrust.

[64] Andrew M. Perlman, “Toward a Unified Theory of Professional Regulation,” Florida Law Review 55 (2003): 999, http://dx.doi.org/10.2139/ssrn.449200.

[65] Andrew M. Perlman, “A Bar Against Competition: The Unconstitutionality of Admission Rules for Out-of-State Lawyers,” Georgetown Journal of Legal Ethics 18 (2004): 148-150, http://ssrn.com/abstract=664194.

[66] North Carolina State Board of Dental Examiners v. Federal Trade Commission, February 25, 2015, 6, http://www.supremecourt.gov/opinions/14pdf/13-534_19m2.pdf.

[67] Ibid., 2, 8-9.

[68] See, for example, Hadfield and Rhode, “How to Regulate Legal Services,” 1194-1195, 1214-1215. See also Ken Friedman, “Could Dental-Board Decision Unlock Lawyer Control of State Bar Regulations?” Forbes, March 4, 2016, http://www.forbes.com/sites/danielfisher/2015/03/04/dental-board-decision-could-unlock-lawyer-control/#75de2e7b68cf.; and Tamara Tabo, “What Lawyers Must Learn From Dentists About The Unauthorized Practice Of Law,” Above the Law, March 2, 2015, http://abovethelaw.com/2015/03/what-lawyers-must-learn-from-dentists-about-the-unauthorized-practice-of-law/?rf=1.

[69] ABA Center for Professional Responsibility, “North Carolina Board of Dental Examiners Decision Resources,” accessed March 17, 2017, http://www.americanbar.org/groups/professional_responsibility/resources/client_protection/north-carolina-board-of-dental-examiners-decision-resources.html.

[70] Friedman, “Could Dental-Board Decision Unlock Lawyer Control of State Bar Regulations?”

[71] Mark Walsh, “Dental Board Ruling May Drill into State Bar Associations’ Immunity,” ABA Journal, May 1, 2015, http://www.abajournal.com/magazine/article/dental_board_ruling_may_drill_into_state_bar_associations_immunity.

[72] North Carolina State Board of Dental Examiners v. Federal Trade Commission, 9.

[73] Marilyn Cavicchia, “Which Way Forward?: National Conference of Bar Presidents Discusses Possible Futures for the Profession and for Bar Associations,” Bar Leader 39 (March-April 2015) http://www.americanbar.org/publications/bar_leader/2014-15/march-april/which-way-forward-national-conference-bar-presidents-discusses-possible-futures-profession-bar-associations.html.

[74] Lisa Foster, Director of the Office for Access to Justice of the US Department of Justice, reportedly met with representatives of the Futures Commission on at least one occasion. She does not have expertise in antitrust or unfair competition law. It appears that she did not raise issues of antitrust or unfair competition but instead “called for each state to develop its own legal help portal, where users could post a legal problem or question and get directed to potential answers.” “Highlights from the ABA’s National Summit on Innovation in Legal Services,” 3 Geeks and a Law Blog, June 4, 2015, http://www.geeklawblog.com/2015/06/highlights-from-abas-national-summit-on.html. See also James Podgers, “Lots of Ideas, But No Single Theme at Commission on the Future of Legal Services’ Public Hearing,” ABA Journal, February 7, 2015, http://www.abajournal.com/news/article/lots_of_ideas_but_no_single_theme_at_commission_on_the_future_of_legal_serv; “Lisa Foster: Director, Office for Access to Justice, U.S. Department of Justice,” accessed March 18, 2016, http://www.americanbar.org/content/dam/aba/images/office_president/foster_short_bio.pdf.

[75] Commission on the Future of Legal Services, “Background,” accessed March 20, 2017, http://www.americanbar.org/groups/centers_commissions/commission-on-the-future-of-legal-services.html.

[76] ABA Commission on the Future of Legal Services, “Informational Report to the House of Delegates,” 1.

[77] Futures Commission Final Report, 9.

[78] Clementi Report, 29.

[79] That being said, and in stark contrast to the ABA, the Legal Services Board of England and Wales has expressly placed on its agenda “our proposal for how the LSB and other regulators can be phased out over time.” Legal Services Board, “LSB Publishes Annual Report for 2013/14,” June 10, 2014, http://www.legalservicesboard.org.uk/news_publications/LSB_news/PDF/2014/20140610_LSB_Annual_Report_Published.htm.

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