Permitting non-lawyer ownership of law firms is a global trend. It is not really about access to justice, as I previously supposed. It’s about changing the law firm business model in a way that works for lawyers and clients.
At least, that is how Riverview Law’s North American VP, Andy Daws, sold the concept at the Clio Cloud Conference. Riverview Law is an alternative business service (ABS), a law firm incorporated under the UK’s Legal Services Act, which, essentially, allows non-lawyers to own and manage law firms, and apparently to perform some legal services. So he’s obviously invested in the idea.
I will be speaking at the 2014 Clio Cloud Conference, September 22–23 in Chicago. Use the code Lawyerist-CCC14 to get $100 off when you register.
Full disclosure: Clio wanted me to come to its conference so badly that it bought me a coach-class ticket to Chicago, put me up in a hotel room with a scenic view of two parking ramps, and made me sit through two days of Prezi presentations.
Is non-lawyer ownership working in Europe and elsewhere?
There are some early indicators that firms with non-lawyer ownership can be a good thing for consumers. In Australia, where the trend got going, incorporated legal practices (ILPs) (pdf) generated 65% fewer ethics complaints than traditional firms. That’s impressive, if you think ethics complaints are a good way to measure quality of service. There are now over a thousand ILPs in Australia, though, so it’s definitely working for someone.
As Daws points out, though, there is a global trend, only accelerated by market pressures. 30 of the top 200 UK law firms are in serious financial trouble. 1,200 UK law firms of all sizes are on a “watch list” for the same reason. Investment is seen as a way to bring some stability to the market. Recall that US law firms may be in a similar boat:
According to Noam Scheiber,writing for New Republic BigLaw is somewhere between 150 and 250 law firms, and “Within the next decade or so, according to one common hypothesis, there will be at most 20 to 25 firms … The other 200 firms will have to reinvent themselves or disappear.”
The trend towards non-lawyer ownership does seem to stop in the US, though. Last year, the ABA — apparently bolstered by 80% of its membership — decided not to pursue the issue. So for now, at least, the issue is not on the table for American lawyers.
Still, Daws sees evidence of “cracks” that may lead to non-lawyer ownership in the US, too. Law firms like Axiom and Clearspire are using similar practices even if they can’t officially get non-lawyer investment. And they are apparently succeeding at it. Daws also thinks that, when the CFPB decided it could regulate lawyers who collect debts, it was the beginning of federal regulation, which could be a step away from protectionists self-regulation. (I’m not sure that’s a good indicator, since debt-collection lawyers have long been regulated by various federal laws like the Fair Debt Collection Practices Act.) He also points to the New York courts’ plan (pdf) to use non-lawyers to help deliver legal services to low-income individuals. Finally, he thinks that if international corporations prefer the legal services they get abroad, they will probably want similar representation in the United States, which might finally sway the ABA.
On the other hand, maybe it’s too early to determine whether the model works. Most of the firms Daws held up as examples have been operating under this legal framework for less than a decade. That probably isn’t long enough for major problems to be revealed.
Why non-lawyer ownership?
So what are the advantages? I’m not super clear on this part, actually. I think the idea is that traditional law firms cannot adapt to a changing market, to the detriment of clients, so that a top-down change in business model is needed. Enter the non-lawyers, who can apply more efficient and effective business and pricing practices.
Here’s Riverview Law’s ad, which hints at the pitch:
So fixed fees, I guess, and a firm business model designed to support them. There’s got to be more to it than that, though. Law firms don’t need non-lawyer investment or management to offer fixed fees. Many already do.
Riverview Law is not the only model, however. Non-legal companies like retail stores and shipping companies are offering legal services as a value-added service to their customers. Imagine consumers buying wills at Wal-Mart, or companies getting employment contracts and advice from their temp agency.
Here is Daws giving a similar (albeit condensed) talk at ReInvent Law in May:
Underneath the shiny-new-business-model rhetoric seems to be a simple idea: cheaper legal services, probably delivered by less-well-compensated lawyers, primarily to the benefit of non-lawyer CEOs and shareholders (on both sides of the transaction, when it comes to corporations representing other corporations). I could be way off base, there, but that’s what I’m reading between the lines.
I see the benefit to clients: cheaper legal services. Maybe that even explains the drop in ethics complaints seen in Australia. I don’t see the advantage to law firms, unless something about law firms makes them incapable of changing their business models without non-lawyer investment and control. That’s a scary concept without a strong justification. I did not get a strong-enough justification from Daws’s talk. [Edit: In fairness to Daws, this was not really the focus of his talk.]
One of the perhaps-more-subtle changes non-lawyer ownership could bring about is to lump lawyers into the same category as other professionals. Daws said that, in the UK, at least, there is a movement to put lawyers in the same regulatory “bucket” as other professionals, subject to the same standards. He calls this “horizontal regulation.”
Will it work? There is no way to tell, but it seems obvious that it would have to involve a re-balancing of professional obligations. Not all professionals have the same high professional obligations as lawyers. Will all professionals have to come up, or will lawyers’ obligations be lessened? Either way, it seems fraught with problems.
Preparing for non-lawyer ownership
To wrap up, here is Daws’s checklist of things lawyers should know and be doing to prepare for the “liberalized” future of law practice (with my editorial comments):
- Online can’t be ignored — it changes everything.
- Invest in high-quality, long-term technology that makes you more efficient and helps you serve clients better.
- Marketing and branding matter more than ever.
- High-end, personalized service is still in demand (though presumably at a new price point).
- Democratized service can create new markets.
- Moving beyond trusted advisor to trusted curator (I have no idea what this means).
- Where services can be unbundled, they will be.
- Where prices can be fixed, they will be.
Do what you can with that.