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The Manhattan Skyline as seen from Hudson Yards Photo: Ryland West/ALM The Manhattan Skyline as seen from Hudson Yards Photo: Ryland West/ALM

Some bar leaders inside and outside New York are pushing back against a working group’s conclusion that rejected, for now, alternative legal business structures in the state, including non-lawyer ownership of law firms.

Daniel Rodriguez, the former chairman of the American Bar Association’s Center for Innovation and dean emeritus at Northwestern University Pritzker School of Law, said in an email that the caution exercised in the report reflects “the conservatism for which New York has long been known.”

Already, states such as Arizona, Utah and California have taken steps to open up who can own and invest in businesses that provide legal services.

When New York’s court system launched a commission in June to facilitate access to justice and ensure it was keeping up with “society’s rapidly evolving changes,” one of the units established by the Commission to Reimagine the Future of New York’s Courts was a working group tasked with unpacking the merits (and drawbacks) of reforming how the profession is regulated to meet the end of access to justice.

Earlier this month, the New York working group issued a report with a set of recommendations. It gave the nod to training and certifying social workers to provide certain legal services and to expanding an existing “court navigators” program to help unrepresented litigants make sense of the system.

But on the issue that is of widespread interest in the bar—“alternative business structure” licenses—the group didn’t follow other states. Alternate business structures “for law firms should not be permitted in New York at the present time,” the report said, adding experiments underway in Arizona, Utah and California should be followed carefully.

“If they are successful, the creation of an ABS model or models in New York state with the use of a ‘sandbox’ should be reconsidered,” the report recommended.

The working group reviewed proposals adopted in other states and determined that there’s just no data connecting ABS licenses and non-lawyer ownership to the goal of increased access to justice. “The short answer is that we just don’t know,” the New York report said.

With regard to Arizona—which eliminated Rule 5.4 barring fee-sharing and outside ownership, while setting up a mechanism to regulate new legal business—the group noted that there was no linkage between the rules change and access to justice. On Utah, where a “regulatory sandbox” is currently in place to evaluate the efficacy of approved new legal businesses, the report said improved law firm profitability is just as likely as better outcomes for access to justice.

Rodriguez, the former chair of the ABA’s Center for Innovation, called the critique of “no evidence” a “red herring,” saying of course there’s no evidence of improved outcomes without having natural experiments to observe. He added that there are theoretical reasons—themselves backed by evidence-based, data-driven analyses of the legal profession—to expect ABS licenses will make a difference.

Given the scale of the problem—the report references a 2014 ABA finding that only 16% of individuals who have a legal need even considered consulting a lawyer—doing nothing but waiting for the results of other states to roll in could be seen as abdicating responsibility, some critics have noted.

“If the goal here is increasing access to legal services, not being bold is basically the same thing as putting a Band-Aid on a broken leg,” said Frankfurt Kurnit Klein & Selz attorney Tyler Maulsby, who chairs the New York City Bar Association’s Committee on Professional Ethics.

Amid California’s efforts to move toward alternative legal business models, public comments revealed real concern that regulatory changes intended to improve access to justice would have unintended, but real, consequences on Big Law.

The prospect of new competition from the Big Four accounting firms is absent from the New York report. It simply wasn’t a consideration, according to working group co-chair Michael Simons, dean of St. John’s University School of Law.

“Because our focus was on improving access to justice, we didn’t focus on the traditional business question of whether this type of regulatory reform would be good or bad for law firms,” he said.

“Our lodestar in our work was to stay focused on one question: In what ways could regulatory reform increase access to justice,” said Simons. “The proposals that we’ve seen for alternative business structures mostly seemed designed to increase access to capital in a way that it wasn’t clear it was necessarily going to increase access to justice for litigants most in need of access to justice.”

But the group’s work is not done, even if they’re prepared to wait.

“We have not seen any evidence that changing the structure of law firms would have any effect on the two million people every year who go to court in New York state without counsel,” said Paul Saunders, a former Cravath, Swaine & Moore partner who served as co-chair. “If we did see that evidence, we would take a very close look at it and take away how it worked and why it had that effect.”

Other members of the working group that produced the report include former New York City Bar president and Smith, Gambrell & Russell partner Roger Maldonado; T. Andrew Brown, the managing partner at Rochester-based midsize firm Brown Hutchinson; Dennis Glazer, a retired partner at Davis Polk & Wardwell; Deputy Chief Administrative Judge for Justice Initiatives Edwina Mendelson; and Laurette Mulry, Attorney-in-Charge of the Suffolk County Legal Aid Society.

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Dan Packel

Dan Packel covers change and innovation in the legal services market, and writes a weekly briefing for Law.com, "The Law Firm Disrupted," on these subjects. He is based in Philadelphia. Contact him at [email protected] On Twitter at @packeld

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