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Friday, February 20, 2015

Alternative Business Structures: The Future of Legal Services?

Alternative Business Structures: The Future of Legal Services?
Anna Blood, Intern
The Cochran Firm

Many Americans have never heard of an Alternative Business Structure (ABS), nor do they know that it may soon be impacting the way they receive legal services. ABS’s allow non-lawyers to have ownership interests in law firms and permits multidisciplinary practices, which combines legal and non-legal services. For example, why not have your accountant, business advisor and lawyer all under one roof?

With today’s technological advances and the globalization of the world market, clients will likely continue to seek alternative, faster, and more convenient means for obtaining legal services. Many people may feel that they have little options when seeking fast and affordable legal services. This demand will likely continue to fuel the demand for such business structures in the legal field.  

ABS’s are not new to the foreign market. For several years, ABS’s have been used overseas in countries such as the U.K., Australia, Canada, Scotland, Germany and the Netherlands. Multidisciplinary practices have been permitted in Ontario since 1999 and in British Columbia since 2010, with certain restrictions and regulation by the Law Society of Upper Canada.

In 2007, England and Wales approved the Legal Services Act, which allowed for the use of ABS’s, permitting non-lawyer management and ownership, as well as multidisciplinary practices. All ABS’s must be approved and are regulated by the Solicitors Regulation Authority in the U.K.

Despite this, there has been strong resistance to ABS’s from the American Bar Association, (ABA) in the U.S. ABS’s conflict with the ABA’s Rules of Professional Responsibility that regulate the practice of law in the U.S.  Due to the ABA stringent rules some companies offering legal services, such as Legal Zoom, and so American law firms, such as Jacoby & Meyers are expanding business opportunities overseas where they can operate under an ABS.

Companies like Legal Zoom and Rocket Lawyer are providing legal services through online legal document creation service. This service is easy to use and more affordable than traditional legal services. However, these companies are also facing negativity from the American Bar Association (ABA), which urges that they may be participating in the unauthorized practice of law.

Under ABA Rule 5.5, non-lawyers are prohibited from creating, owning or managing law firms, either alone or in a partnership with lawyers, and are prohibited from multidisciplinary practices. Under Rule 5.4, lawyers are prohibited from actively seeking clients or advising them in states where they are not licensed.  Additionally, the ABA’s Commission on Ethics 20/20 has been very skeptical, despite encouragement to amend some of the rules that would permit the formation of ABS’s.

Nonetheless, the ABA appears to be aware that an assessment of the efficiency of the legal market is necessary. Since 2009, the ABA Commission on Ethics 20/20 has been examining the impact of globalization and technology on the legal profession and whether the Rules need to be amended to better serve the legal profession and clients.

ABA President William Hubbard stated that, “We have a huge gap in our justice system, a justice system that is not accessible to a majority of the poor in this country and an ever growing number of modern-income people.”

Despite pressure to amend the ABA Rules, the District of Columbia remains the only place in the U.S. that permits the use of ABS’s. Companies like Tandem Law in D.C. are working as an ABSand advising clients not only on legal matters, but also on business and growth capital. Additionally Tandem Law is allowing clients to be shareholders in the company.

With this perspective in mind, some may call the current legal industry a monopoly. While the need to regulate the practice of law is justified and can provide peace of mind to clients, the efficiency and cost of legal practices is open for review. Many people may feel discouraged or even intimidated from seeking legal services due to fears that they will be unable to afford it or may be taken advantage of. Additionally, searching for a lawyer can be a daunting task, especially for clients who live in rural areas or are unfamiliar with the legal market.

In spite of this, an ABS could provide some relief, and would be beneficial not only to the client, but also to the growth of the legal market. For the client, it would provide a one-stop shop for all business and legal matters, possibly saving the client time and money. Additionally, allowing non-lawyers to have an ownership interest in law firms would increase investment from other fields which would likely lead to reduced costs for firms and lower fees for clients. An ABS would also promote competition between attorneys, encourage innovation, and promote more choices for clients.

Likewise, the use of technology in an ABS can provide an effective and affordable way for clients to search for attorneys when seeking legal services. Imagine how easy it would be for clients to connect with their attorney via the internet and have legal needs served from the comfort of their home. Further, this would create cost effective solutions that would pass onto the client and allow attorneys to serve clients in multiple areas.

With the growing popularity of online legal services and the expansion of the legal market overseas,  a change in the U.S.’s legal market may be over-due. It is also clear that clients are ready for that change, as well as alternative solutions to legal services. While the evolution of the legal market may be eminent, the standards and values of the legal profession should be maintained.

posted by The Cochran Firm at 3:20 PM

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