The New Jersey Supreme Court wants to do something about the scandalous “access to justice” problem: the fact that few Americans can afford a lawyer.
So in October, it formed a working group to consider requiring up to 50 hours of free, or pro bono, legal services as a condition of being allowed to practice law in the state.
Unfortunately, more pro bono will have almost no effect on the access-to-justice problem. Worse, it diverts attention from game-changing reform the court could adopt tomorrow: repeal of New Jersey Rule of Professional Conduct 5.4, which blocks nonlawyer ownership and investment in law businesses.
Evidence from recent reform in England, as well as growing economic and scholarly analysis, have exposed these ownership restrictions as roadblocks to lower-priced, consumer-friendly legal services. The court has the exclusive power to reform these anti-competitive, anti-consumer ownership rules. It could dramatically improve the access-to-justice problem by doing so.
The Supreme Court is right to be concerned about access to justice. Acting Administrative Director Glenn Grant noted in his Oct.16 letter to the working group that 97 percent of small claims and 99 percent of landlord-tenant defendants in New Jersey are unrepresented. A recent New York study disclosed that more than 95 percent of parties in housing, family and consumer debt matters lack counsel.
Nor is the problem new. A 1993 American Bar Association study revealed that half of American families were experiencing a legal problem for which a lawyer would have been helpful, but 60 percent to 70 percent never retained one.
More pro bono is not the answer. As noted by economist and law professor Gillian K. Hadfield in recent scholarship, if every lawyer in America contributed another 100 hours of pro bono services, that would supply only an hour more per legal dispute per household. The problem is not lack of charity, it is the exorbitant cost of legal services, which is kept high by the economic restrictions on the business of law — in particular the ban on nonlawyer ownership of legal businesses.
Hadfield explains that reducing legal costs requires increasing the scale of legal businesses; introducing branding so consumers can rate legal services online; investing in product and process improvements, particularly through the Internet; and tailoring services to different parts of the legal market. Introducing outside capital and risk-sharing will unquestionably accelerate such developments: they are standard tools that economists understand reduce costs, improve quality and spur innovation.
In England, which recently scrapped restrictive law-firm ownership rules, cheaper, more consumer-friendly legal services have already appeared, such as web-based offerings of comprehensive legal support tailored to common legal problems and ventures that will place lawyers in consumer businesses with more than 100 outlets.
Americans need legal services today more than ever, as issues of mortgage debt, immigration, bankruptcy, job loss, child custody and access to government services and benefits have become increasingly complex. It is intolerable that the profession continues to block reform that could respond to this need.
New Jersey was almost a leader on this issue in 1983. In that year, the New Jersey Supreme Court constituted the blue-ribbon Committee on the Model Rules of Professional Conduct, known as the Debevoise Committee, to evaluate for adoption the American Bar Association’s new Rules of Professional Conduct. The committee recommended most of the proposals for adoption, but not Rule 5.4, preferring an earlier version that would have permitted nonlawyers to own legal businesses. Alas, objection from the State Bar Association overrode the committee’s recommendation and Rule 5.4 was adopted. Now, 30 years later, the force of the Debevoise Committee’s thinking is more evident than ever.
One of the key obstacles to reform is the way the legal profession is regulated. In New Jersey, as in most states, the highest court, the New Jersey Supreme Court, has exclusive authority. In fulfilling that responsibility, too often courts defer to the organized bar. Taking guidance from the bar makes sense on some issues, but not when it comes to ownership of legal businesses. The profession is hopelessly conflicted on this point. It sees reform as opening the way for national retailers like Walmart or Target to enter the legal business — creating a huge competitive threat. Bar group after bar group, not surprisingly, has decided the amount of competition at present is just fine.
In England, the government deliberately appointed a financier, not a lawyer, to lead the study that ultimately threw out the old restrictions on ownership of law businesses. Our Supreme Court should follow that approach, or at least be sure economists, consumer advocates and business leaders are part of any committee evaluating reform. •