New Delivery Models Can Be Developed Without Changing Rule 5.4
Theoretical arguments that the innovation in legal services necessary to meet…legal needs can take place…without regulatory change are nothing but theoretical…The reality is that in the absence of regulatory change, the necessary innovation is not happening.
Some have argued that alternative structures are not needed because new models for the delivery of legal services can be and have been developed without them. These arguments include:
- “[T]he desired increased efficiencies and competitiveness that external investment is designed to encourage abroad are already present in US firms based on those firms’ responses to changing market pressures. Because the US legal market is already realizing and implementing many of the desired benefits that structural changes allow abroad, introducing such a substantial regulatory change at this time would not create sufficient benefits to offset the potential ethical costs.”
- “The idea that ABSs do not drive transformative change is consistent with developments in the United States, where there has been considerable innovation throughout the legal industry despite the absence of ABSs. [These innovations] are being driven by extant trends, such as rapid advances in technology and globalization, not ABSs.”
- “It is not clear that ABS can provide innovation in delivery of legal services that lawyers practicing in traditional firms cannot… in recent years we have seen significant change… This change has come about as a result of the efficiencies and exigencies of modern‐day practice, not as a result of ABS.”
- “ABS are not synonymous with [nonlawyer ownership]. There can be innovation in the law firm model, billing structures, or the delivery of legal services without changing the rules about ownership. Innovation in legal services is a laudable goal, but de-regulation or the introduction of [nonlawyer ownership] is not a necessary precondition for such change.”
- “Without ABS, we can achieve all the benefits fatuously claimed as possible only through ABS.”
Following the same logic of this theoretical argumentation, with enough effort, many people with just one eye are able to see a great deal, and many people with just one arm are able to do a great deal. Those people are proof that a second eye or a second arm is a tool, or a resource, that is not strictly necessary.
As discussed briefly in the Introduction to this book, as the world has evolved and grown more complex, so have the practice of law and the provision of legal services. Companies like LegalZoom, Axiom, RocketLawyer, Shake, Modria, Axess Law, Aluvion, and Conduit Law, to name a few, are proof that it is possible to develop new models for the delivery of legal services while remaining within the limitations of the existing rules.
However, if companies like the ones listed above have been able to do so, it is because, like persons with just one eye or just one arm, they had no choice but to do so. But also just like persons with just one eye or just one arm, they could do much more, much faster and with greater effectiveness, if they could have access to a full range of resources and tools. This is the essence of the arguments that the literature described in chapter 4 advances, it is an essential motivation of the litigation Jacoby & Meyers brought against authorities in New Jersey, New York, and Connecticut, and it is an essential reason that LegalZoom sought ABS status in England and Wales (both discussed above in Chapter 4).
Indeed, empirical studies indicate that at least one of the ways that ABSs are doing more is with greater use of new information and communication technologies. When in 2015 the Council for Licensed Conveyancers (“CLC,” one of the several “front-line” regulators in England and Wales) questioned the firms and businesses that it regulates (traditional firms as well as ABSs) with respect to their use of information and communication technologies, the results revealed that while 44.4% of ABSs provide clients “some form of online interactive service other than (and probably in addition to) e-mail,” only 14.6% of traditional firms did the same. These results lead the CLC to conclude that there is “a substantial disparity in the use of innovative” technologies between traditional firms and ABSs. These results of the CLC are comparable to those of a 2013 study and survey conducted by the LSB: 91% of the ABSs that responded to that survey indicated having a website that they used to deliver information and other services to their customers, including basic information, online case tracking and feedback systems. In contrast, just 52% of traditional firms reported having a website that they used for advertising and 6% used legal networks websites. For the CLC, the results of these two studies are highly significant in part because while information technology is certainly useful for commercial work (and particularly in bulk), “people — individual consumers — increasingly expect to be able to find, purchase, and monitor the progress of services online.”
In their article “Life in a Law-Thick World: The Legal Resource Landscape for Ordinary American,” Gillian Hadfield and Jaime Heine demonstrate on the basis of available data that on both a “macro” and a “micro” level, the resources available to ordinary Americans to address their legal matters are a fraction of those available to individuals in other countries.
More specifically, on a “macro” level, Hadfield and Heine compare data for the US and a selection of European countries — data such as total population, total expenditure on courts, public prosecution and legal aid, total number of criminal and civil cases, and total numbers of judges and lawyers. In analyzing this data, they find evidence of a “surprising fact:”
[A]lthough public expenditure, legal aid, numbers of judges and numbers of lawyers are comparable (or high) on a per capita basis, the much greater volume of cases in the US implies that the US devotes many fewer resources to supporting the legal system on a per case basis. That is, Americans choose or have no choice but to go through court-based processes at a much higher rate, but compared to other countries, there are fewer public dollars, judges and even lawyers available to them when they do so.
On a “micro” level, Hadfield and Heine, after deploring the paucity of studies and data with respect to the legal resources available to ordinary Americans, analyze the “small and disconnected bits” that are available. On that basis, they conclude:
What we find suggests that while Americans face legal needs at rates comparable to those faced by people in other countries, Americans are more likely to take no action to resolve these problems. When they do take action, they do so with fewer legal resources available to them…
We identify here a troubling indication that Americans are led to ‘lump’ their legal problems and do nothing about them at higher rates than is the case in these other countries. Looking closely at these studies suggests that one reason might be that Americans have fewer places to turn for legal help: environments in which people have more open regulatory systems that allow a wider variety of professionals to assist people with legal problems — not just lawyers, as is the case in the US — appear to be the ones in which people are significantly less likely to do nothing when trouble emerge. That is important: ignoring legal problems is likely to cause more problems. Moreover, both ignoring legal problems and muddling through them without legal help undermines our confidence that the complex legal rules and entitlements we have put in place are, in fact, accomplishing the objectives they are designed to achieve.
Reports from the state of New York corroborate Hadfield and Heine’s findings. More specifically, each year since 2010, the state’s Permanent Commission on Access to Justice (formerly called the Task Force to Expand Access to Civil Legal Services in New York) has “assisted in the preparation for four public hearings on civil legal services to assess the extent and nature of the current unmet civil legal needs of low-income New Yorkers throughout the State, and to identify the level of resources necessary to meet that need.” In connection with those hearings, each year the Commission has collected the oral and written testimony of approximately 45 to 100 persons. The witnesses come from a wide range of backgrounds, and include “business leaders, private and public residential property owners, bankers, local government officials, District Attorneys, labor leaders, medical providers, educators, providers of domestic violence prevention services, religious leaders, Judges, and clients.” On the basis of the hearings and the witness testimony, each year the Commission repeats its finding of a growing or “continuing crisis of the unrepresented in [the] State’s courts and the continuing unmet need for civil legal services,” and each year the Commission repeats the urgency of the “need for additional resources to bridge the justice gap.”
The work of the Commission, together with that of Hadfield and Heine, shows that the resources available in the US for “ordinary” and low-income Americans to meet their legal needs are not sufficient — they have access to some resources and tools, but that access is limited, and, for many, highly limited. The Commission’s work demonstrates that as a result of this lack of access, many persons are suffering, and their need for greater access to resources is urgent.
Considered in this context, theoretical arguments that the innovation in legal services necessary to meet these legal needs can take place in the US without regulatory change are nothing but theoretical. In contrast to the theory, the reality is that in the absence of regulatory change, the necessary innovation is not happening at a sufficient level, and, concretely speaking, there are no grounds for believing that, absent regulatory change, it actually will happen at a sufficient level in the future.
Monica Goyal, Founder and Principal, Aluvion Law: Goyal explains that Aluvion could grow much faster if it could access outside capital.
Peter Carayiannis, Founder and President, Conduit Law: Carayiannis explains that the firm’s growth and scalability as well as access to top talent are limited because the company can neither offer non-legal services in combination with legal services, nor bring in IT, marketing and other professionals into the firm’s equity structure.
Rubsun Ho and Joe Milstone, Founding Partners, Cognition LLP: Ho and Milstone explain that lack of access to capital has limited the company’s recruitment of lawyers and senior managers, slowed its deployment of technology, and discouraged its entry into other markets (including overseas).
 Renee Rayne, “Do U.S. Firms Need External Equity Investments to Remain Competitive?” Texas International Law Journal 49 (2014): 560, http://www.tilj.org/content/journal/49/num3/Rayne559.pdf.
 Perlman, “Towards the Law,” 86-87.
 Ontario Trial Lawyers Association, “Submission on Alternative Business Structures,” 1.
 Ibid., 10.
 Jasminka Kalajdzic, “Memo to Linda Langston of the Ontario Trial Lawyers Association,” December 1, 2014, 8, https://s3.amazonaws.com/membercentralcdn/sitedocuments/on/on/0616/717616.pdf?AWSAccessKeyId=0D2JQDSRJ497X9B2QRR2&Expires=1483884918&Signature=to%2F8NBwZ81KsiC9svKda8EuuULw%3D&response-content-disposition=inline%3B%20filename%3D%22Dr%20%20Kalajdzic%20Study%20on%20NLO%2Epdf%22%3B%20filename%2A%3DUTF-8%27%27Dr%2520%2520Kalajdzic%2520Study%2520on%2520NLO%252Epdf.
 Bradley Wright, January 20, 2015 (12:53 pm), comment on Mitch Kowalski, “Anti-ABS Arguments Continue to Be Based on Emotion — Not Fact,” Slaw, December 30, 2014, http://www.slaw.ca/2014/12/30/anti-abs-arguments-continue-to-be-based-on-emotion-not-fact/.
 See, for example, Hadfield, “Legal Barriers to Innovation,” 130-141.
 Council for Licensed Conveyancers, “ABSs Leading the Way on Information Technology,” CLC Blog, April 13, 2016, http://www.conveyancer.org.uk/CLC-Blog/April-2016/ABSs-Leading-the-Way-on-Information-Technology.aspx.
 Legal Services Board, “Evaluation,” 6.
 Hadfield and Heine, “Life in the Law-Thick World,” 3.
 Ibid., 1-2.
 Ibid., 3.
 Ibid., 11.
 Ibid., 4.
 Task Force to Expand Access to Civil Legal Services in New York, “Report to the Chief Judge of the State of New York,” November, 2014, ii, https://www.nycourts.gov/accesstojusticecommission/PDF/CLS%20TaskForce%20Report%202014.pdf.
 Task Force to Expand Access to Civil Legal Services in New York, “Report to the Chief Judge of the State of New York,” November, 2010, 3, https://www.nycourts.gov/accesstojusticecommission/PDF/CLS-TaskForceREPORT.pdf; Task Force to Expand Access to Civil Legal Services in New York, “Report to the Chief Judge of the State of New York,” November, 2011, 15, https://www.nycourts.gov/accesstojusticecommission/PDF/CLS-2011TaskForceREPORT_web.pdf; Task Force to Expand Access to Civil Legal Services in New York, “Report to the Chief Judge of the State of New York,” November, 2012, 7, https://www.nycourts.gov/accesstojusticecommission/PDF/CLS-TaskForceREPORT_Nov-2012.pdf; Task Force to Expand Access to Civil Legal Services in New York, “Report to the Chief Judge of the State of New York,” November, 2013, 10, https://www.nycourts.gov/accesstojusticecommission/PDF/CLS-TaskForceReport_2013.pdf; Task Force to Expand Access to Civil Legal Services in New York, “Report to the Chief Judge of the State of New York,” November, 2014, 9, https://www.nycourts.gov/accesstojusticecommission/PDF/CLS%20TaskForce%20Report%202014.pdf.
 NY Report 2014, 9-10.
 NY Report 2010, 1; NY Report 2011, 1; NY Report 2012, 1; NY Report 2013, 1; NY Report 2014, 1.
 NY Report 2014, 1.
 NY Report 2010, 8; NY Report 2011, 8, 10; NY Report 2012, 4, 7; NY Report 2013, 1, 11; NY Report 2014, 1, 10.
 NY Report 2014, 10.