The American Bar Association’s offices in Washington, D.C. (Diego M. Radzinschi)
The American Bar Association’s Commission on the Future of Legal Services this year revived long-running arguments over whether to allow outside investors to fund law firms. In an April issues paper, the commission noted that the United States stands apart from most other jurisdictions in mostly prohibiting such investments, and it called for the legal industry to offer input on the pros and cons.
The debate could have major implications for access to legal services in the U.S. and for the future of firms that compete globally. So why are the country’s most powerful firms sitting it out?
On Friday the ABA posted all 72 comments it had received by the commission’s deadline. Big Law was noticeably silent. Zuckerman Spaeder, which wrote a letter in support of so-called alternative business structures (ABS) and multidisciplinary practices (MDP), was the only Am Law 200 firm to weigh in.
Although the commission didn’t take a position on opening the U.S. legal industry to investors, its paper suggested that doing so could expand the reach of low-cost legal providers while offering better service for corporate clients. Opponents, the commission wrote, mainly argue that allowing nonlawyer ownership could threaten lawyers’ “core values” and independent judgment.
The vast majority of commenters opposed any change. A letter from the ABA’s Family Law Section put it most bluntly: “WHAT PART OF “NO!” DO YOU NOT UNDERSTAND?” wrote Marshall Wolf of Cleveland’s Wolf and Akers. “We remain unalterably opposed to these repeated, previously failed efforts to foist ABS upon our profession or our ethics.” Most of the objectors raised ethical concerns, while some warned that large alternative business providers might drive them out of business.
Zuckerman Spaeder, in contrast, welcomed the decision to revisit the issue. “It is time to move beyond the unsupported fears and implement an ABS and MDP alternative that enables U.S. lawyers to deliver significant benefits to clients,” wrote partner Graeme Bush. “What is best for clients should be the ultimate concern.”
Bush added that the opposition to this change “ignores the possibility that lawyers may learn something from their nonlawyer partners. … [They] may have much to learn about quality and risk management that will benefit their clients.” In his letter, Bush noted that the firm has a multidisciplinary client in the U.K.
Gillian Hadfield, a professor at the University of Southern California Gould School of Law, said in an interview Monday that alternative business structures are essential to improve access to justice.
“It’s absolutely critical,” Hadfield said. “There is no path to access to justice without alternative business structures.” Only a large entity supported with outside capital can provide the economies of scale needed to bring down the cost of legal services to the masses, she said, adding that most law firms are still using a 19th-century model. (Hadfield sits on the legal advisory council of LegalZoom.)
Hadfield said she suspects that large law firms are keeping out of the debate because they may not have the stomach for it. “It gets pretty nasty,” she said about the controversy. “They may think, ‘Why bother?’” But she believes Big Law could and should play an important role.
“I think absolutely it would make a difference,” she said. “These are the most prestigious voices.” Even if these firms don’t want to use outside capital themselves, she would like to see them speak up for those who can’t afford a lawyer. Said Hadfield: “It’s their professional responsibility.”
Four partners from Am Law 200 firms wrote individual letters, all opposing alternative business structures, including former ABA president James Silkenat of Sullivan & Worcester. Other opponents include the Illinois Bar Association , the New York State Bar Association, the State Bar of Texas, and the ABA’s Section of Litigation.
This is the third time this century that the ABA has considered allowing nonlawyers to play a greater role in U.S. firms. In 2000 its House of Delegates rejected a proposal to allow multidisciplinary practices. In 2011 an ABA group called the Commission on Ethics 20/20 concluded that there wasn’t sufficient basis for recommending change.
Two jurisdictions permit nonlawyers to have an ownership stake in law firms—Washington state and Washington, D.C.—but the practice hasn’t become common. One reason is that any firm with a presence outside those locations could run into problems.
The Commission on the Future of Legal Services was formed in August 2014 by then-incoming ABA president William Hubbard, a partner at Nelson Mullins Riley & Scarborough who has advocated to improve access to justice. Under the leadership of former Northrop Grumman Corporation lawyer Judy Perry Martinez, the commission has explored new ways to improve the delivery of civil legal services to the public.
Earlier this year, the Futures Commission tackled another hot issue, when it submitted a resolution at the ABA’s midyear meeting providing a framework for states to regulate nonlawyers who provide simple low-cost legal services. Despite a strong backlash, the resolution passed in a voice vote.
USC’s Hadfield said that allowing alternative business structures is even more necessary. “It’s far more important,” she said.