One of the biggest scandals for the nation’s legal profession is its inability to offer accessible, reasonably priced legal services to the middle class. Lawyers are so expensive, and their services so confusing, that only corporations and wealthy individuals can afford them.
The United States now ranks 67th in the “people can access and afford civil justice” ranking of the respected Rule of Law Index. That places us behind Iran, China, Pakistan, Uzbekistan and, of course, all the countries of Western Europe.
Now an elite task force of law deans as well as government, law firm and company lawyers—gathered together by the New York City Bar Association—offers a potential solution to this problem: get rid of the profession’s own “ethics” rule that bans outside investment in law firms.
In a report issued on Nov. 14, the task force backs the views of economists and academics who have long seen this ban as denying legal entrepreneurs the funds needed to create consumer-friendly legal service providers: “new model” firms that use process improvement, scale and technology to commoditize services and reduce price.
To quote the task force’s report: “access to outside capital could be a game-changing development in providing legal advice to the moderate- and low-income individuals who currently have unmet legal needs.”
Fueling the task force’s plea for reform is a related embarrassment for the profession: it can’t employ its newly minted lawyers. Barely half the law school graduates of the classes of 2011 and 2012 have full-time work as lawyers. The legal profession has proven itself incapable of matching these unemployed lawyers with the huge numbers of Americans that need but can’t afford a lawyer.
The task force sees the ban on equity capital as contributing to this mismatch. To quote its report: “Rules limiting non-lawyer investment in law firms are an impediment to innovation in the provision of legal services, and to creation of positions and experiences for new lawyers.”
Unstated in the report is one of the profession’s dirty secrets: the rule it highlights as the cause of injury to the middle class and of pain to new lawyers is championed by the American Bar Association and state bar associations that are compromised, in the view of many, by their members’ economic self-interest.
Many in these bar groups view the “new model” law firms that the task force sees as prospering under the rule change—efficient, consumer-friendly and cheap—eating their lunch.
Will these new calls for reform be crushed by a profession that continues to regulate itself, even while putting its own economic interest first? It is hard to be optimistic. But there are several reasons for hope.
First, the United Kingdom has radically liberalized regulation of lawyers, permitting law firms access to outside capital in late 2011, with improving access to justice as the key rationale. Mounting evidence of the availability of cheaper, more consumer-friendly legal services in the United Kingdom will create increasing pressure for reform in this country.
Second, the task force’s report states that it plans to pilot a “mission-driven,” commercial business model to provide legal services to middle-class customers now priced out of the market. The intent is to develop a “sustainable and scalable business model” that will likely run hard up against the current ban on outside funding. Indeed, the task force itself states that implementation of the plan “will depend on success in attracting significant start-up funding from both within and outside the legal profession.”
If the task force’s own exercise in creating a law firm for middle-class customers founders on the ban on investment, the call for reform could become deafening. •