Herman Van Ommen, Law Firm Regulation Task Force, Law Society of British Columbia

We see the regulation of law firms as housekeeping. That is, it’s time for it. Law firms have been part of the legal services landscape for the past 40 years, albeit larger and more dominant in the past 20. As of now, we don’t directly regulate them, even though firms are responsible for much of the behavior of lawyers.

The Law Society of British Columbia regulates, licenses and disciplines the lawyers of British Columbia.

In 2012 our Legal Profession Act was amended to grant to the Law Society the authority to regulate law firms. Before that, the Law Society only had the power to regulate individuals. Now we are in the process of developing the rules we need to exercise that authority.

My Task Force was created in 2014. Our mandate is to consult with each other and with the members of the Law Society, and on that basis to propose a framework for the regulation of law firms. To date, my Task Force has issued a brief consultation report, we’ve conducted a written consultation process, and we are now traveling through the province in order to meet in person with local bar associations to obtain their input and views.

Our mandate is to develop a framework for rules to regulate law firms, as opposed to entities more generally. The Task Force is not looking at alternative business structures (ABS). We are not opposed to ABS, but nonlawyer ownership of law firms implies policy issues that my Task Force is not being asked to consider at this time. Of course, whatever we do with respect to law firm regulation will likely have application should we ever decide to permit ABS.

We see the regulation of law firms as housekeeping. That is, it’s time for it. Law firms have been part of the legal services landscape for the past 40 years, albeit larger and more dominant in the past 20. As of now, we don’t directly regulate them, even though firms are responsible for much of the behavior of lawyers. For example, when a lawyer engages in a conflict of interest, often it is with the permission of the governing committee of the law firm. Yet, we don’t discipline a firm when its makes inappropriate decisions of that kind. Law firm regulation is a way to make sure that all the actors in the legal services market are directly subject to regulation.

By regulating law firms, we will not change our Code of Professional Conduct as it applies to individual lawyers. That is, by regulating law firms, we will continue to regulate lawyers on an individual basis as well.

In our consultation process, some have expressed the concern that law firm regulation will add an extra level of regulation, and, in that manner, increase the regulatory burden placed upon lawyers. Our response to that is this: in some ways, we are removing some of the regulatory burden from individual lawyers and placing it on firms. This is because if the firm makes a decision that controls behavior in  areas such as conflict of interest, advertising, trust accounting (as examples), it is the firm that should be responsible.

In our consultation process we often hear the opposite concern as well, which is that if we remove certain responsibilities from individual lawyers, it will lead to more unethical behavior, not less — that law firm regulation will free up individual lawyers to be less ethical. I personally don’t understand this. Firms have a strong influence on lawyers and their activities. Firms influence the professional standards and ethical behaviors of individual lawyers. That is part of a firm’s culture. Law firm regulation will require firms to be more thoughtful about their culture and take steps to ensure they have a good culture. It is wrong to think that because a firm is responsible, an individual lawyer can do whatever he or she wants. Individuals will have to answer to their firms — firms are much closer to their individual lawyers than is the Law Society.

What I have discovered in the consultation process is that the concept of proactive regulation is not well understood. We explain it this way: “We well set out a series of objectives. We are not going to tell you how to meet these objectives, we are not going to tell you what policies and procedures to have in place. We’re only going to tell you to figure out a way to ensure that your lawyers do not, for example, engage in conflicts of interest. That’s all we’re asking you to do.” This is quite a different concept for lawyers because to date our regulation has been very prescriptive.

Currently, we act only on complaints. Law firms have a much better idea than the Law Society does of what its lawyers are doing. In this respect, law firm regulation should result in a greater number of issues being noticed and addressed before they reach the stage of a complaint. In this sense, with law firm regulation, individual lawyers will be subject to greater scrutiny.

With respect to the written consultation process, we received responses that were all over the board. Some people expressed opposition to law firm regulation, while others expressed support. A notable recurring comment relating to sole practitioners and small firms, was that because they don’t have the resources that larger firms do, they should not be subject to the same requirements. It is clear we will need to address this concern.

Interestingly, as we travel around the province to meet with lawyers in person, we are not encountering much pushback on the concept of firm regulation. Some people have said “we thought you already did that.”

In our presentations, we give this example: when a complaint is filed with respect to an individual lawyer, currently we can only deal with that lawyer because all investigations are confidential. We cannot even go to the lawyer’s managing partner and say “Did you know Joe is having a problem? We’ve had two complaints, it appears he is not paying attention to his files. What is going on? Can you help him?” We can’t do that. It’s when we tell this story that we don’t get pushback on the concept of firm regulation.

In our consultations, concern has been raised with respect to the prospect of firms having to develop their own policies. So, the consultation procedure has taught us that the Law Society will need to be involved in helping to develop model policies, and in setting up groups to help firms to work together. Certainly there will need to be a transition time for firms to develop policies to meet the regulatory objectives.

Concern has also been raised around policies relating to equity and diversity in law firms. We’ve received a lot of questions about just what this means, and what the precise objectives will be. We don’t have responses to those questions yet, but we are working on it.

Outside of those specific concerns, most of the people we are consulting with see firm regulation as a relative no-brainer. This is especially true with respect to the core areas like conflicts, file management, client management… They say that of course we should be regulating firms with respect to these issues.

We have watched with interest the debate in Ontario with respect to ABS. In watching that debate, it became even more clear to us the importance of not polluting our project of law firm regulation with the politics of ABS.

Of course, the other law societies of Canada are also working on law firm regulation, and we are in touch with their task forces. We keep close tabs on each other, to keep each other informed as to what we are doing and the directions we are heading. What I have found interesting is that even working separately, we’ve developed quite similar approaches. I anticipate that across the Canadian provinces we will end up in substantively similar places. There will be differences, for sure, but I don’t think they will be fundamental differences.

We get so many complaints that are relatively minor — he didn’t return my calls, he was rude to me, that kind of thing. If every firm was required to have a customer complaint number on their website and on their retainer letters — that would be the first place for clients to call. And any managing partner worth their salt would solve those problems before they reach the Law Society.

Utilizing the law firm in a regulatory model should be a very effective way to impact a lawyer’s behavior, because the firm is more likely to have a cooperative relationship with its members. From a regulatory perspective, the Law Society’s relationship with lawyers is often more adversarial, and adversarial relationships are often less effective in modeling behavior.

Protection of the public is one of the Law Society’s statutory mandates, as is ensuring that lawyers conduct themselves in an appropriate and ethical manner. If we can prevent complaints, or at least reduce them, that fits squarely within our mandate. As compared to a law society, law firms are a much more effective way to impact a lawyer’s behavior. With law firm regulation, there is a real chance that we can reduce the number of complaints that the public make about lawyers.

This story is supplemental material for Democratizing Legal Services: Obstacles and Opportunities and Modernizing Legal Services in Common Law Countries: Will the US Be Left Behind? To learn more about these books, please click here and here.

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