Delivery of Legal Services Is Changing as More States Explore Reform Measures

Delivery of Legal Services Is Changing as More States Explore Reform Measures

More states now appear open to the possibility of permitting nonlawyer ownership of law firms, which state regulatory bodies have long prohibited as part of a broader set of rules barring the unauthorized practice of law.

Indiana, Minnesota and Washington state are among the latest jurisdictions exploring the creation of pilot programs that could pave the way for alternative legal service providers to engage in work that was traditionally solely reserved for licensed attorneys.

Utah in 2020 implemented a regulatory sandbox paving the way toward nonlawyer law firm ownership, but it was adopted with a sunset provision, and will end after seven years.

And just this summer, Indiana began exploring the possibility of creating a regulatory sandbox that could potentially lead to nonlawyer, legal professionals becoming licensed to engage in specific legal services, among other reforms.

Reform on the Rise?

The ongoing reform movement has generated strong feelings on both sides of the aisle, with supporters saying that these measures could make certain legal services more affordable for average consumers, and opponents warning that it could lead to a profit-over-service mentality and the monetizing of justice as alternative providers look to cash in on litigation.

“This is happening as we are seeing a tremendous technology shift and the possibility that consumers may go, frankly, straight to AI tools to try to get some of their answers,” said Craig Shank, a Washington attorney who works with artificial intelligence and emerging tech. “And so finding a path to bring all of that together and make sure that we are being very effective in delivering outcomes to the citizens of Washington state … but [also] to citizens across the nation, that’s critically important.”

Damien Riehl, a Minnesota-based attorney with a long history in the legal tech space, said opening up the legal market to alternative legal service providers, or ALSPs, could help tackle a serious access-to-justice problem faced by underserved communities.

“It’s impossible to pro bono our way out of this access-to-justice gap,” said Riehl, who works for vLex, a global legal digitized intelligence platform for legal professionals.

Riehl chairs an AI investigatory committee in Minnesota that was approved by the state bar association to oversee a proposed regulatory sandbox designed to protect against unauthorized-practice-of-law prosecutions in cases where ALSPs aid lower-income individuals with enhanced access to justice.

“This is a way that we could be able to help 92% of legal needs that are unmet because we lawyers are too expensive,” Riehl said.

In August, Law.com reported on Minnesota’s proposed regulatory sandbox, noting that if fully implemented, the program could also leverage AI to aide self-represented litigants in dealing with the court system.

Proponents of regulatory reform note that it isn’t just low-income individuals who experience access-to-justice hurdles; many middle-class Americans also have difficulty finding affordable legal representation, they say.

“When we talk about the access-to-justice gap … we’re talking about that whole spectrum,” said Jessica Bednarz, director of legal services for the Institute for the Advancement of the American Legal System. “If you are only talking about the low-income population, the people who qualify for legal aid, a lot of these programs are not designed to only serve that group, they’re designed to serve people beyond that group.”

In Washington state, Shank said he has heard from some consumers who are concerned about the quality of services delivered by ALSPs, but those same concerns can be shared with regard to traditional law firms.

“I understand that there is a valid reason to be concerned about the quality of services delivered and yet there’s nothing in the practice of law that requires that somebody becomes highly skilled at a given specialty before they hang out a shingle to go practice in that subspecialty,” he said. “As long as we are maintaining in other ways the obligation of competence, the obligations of quality of service, I think it’s OK that we shift a little who delivers the actual services themselves.”

In Indiana, the push for reform came about after the legal community grew increasingly aware of the ongoing access-to-justice crisis.

The Indiana Bar Association began learning about the reform measures in other states, such as Arizona, and initiated conversations with its Supreme Court addressing the challenges the state is currently facing, including an attorney shortage.

“We kind of felt like at some point in time, these topics would come to our state,” said Joe Skeel, the bar association’s executive director.

The Indiana Supreme Court ended up creating a committee in 2023 to study issues such as allied legal professionals taking over some duties from attorneys and similar topics, and the bar association followed by putting together a parallel committee, Skeel said.

“The court supported that, and we communicated that … we just felt like it was important that whatever ideas or solutions or things we came up with really needed to be developed by the practitioners and put forth by practitioners without the influence of the court,” Skeel said.

“Whatever we end up with, if we can find alignment with the court, it’s much more likely that those things would be successful in the long run because we could have support and buy-in from both the judiciary and the practitioner,” Skeel said.

New in Legal, Established Elsewhere

While ALSPs are a relatively new concept within the legal profession, similar alternatives have become commonplace in other industries. Experts highlight, for example, the tax profession, which has seen the rise of TurboTax and similar tools, and the investment advice industry, which was forced to make way for commission-free, web-based digital investing platforms.

In the legal field, ALSPs have a number of benefits, including reducing cost and increasing speed and efficiency, according to the ABA. These entities operate in a range of market segments, with companies such as LegalZoom and Rocket Lawyer positioning their services toward individuals and small businesses, while players such as UnitedLex and Elevate seeking both to collaborate and compete with large law firms serving corporate clients.

There’s no denying that the ALSP market is lucrative. Revenues from ALSPs hit $20.6 billion in 2023, according to a report by Thomson Reuters, Georgetown Law’s Center on Ethics and others. The same report found these entities grew at a compounded annual growth rate of 20% from 2019 to 2021, a healthy rise from the 15% CAGR recorded between 2017 and 2019.

While some in the legal profession worry that ALSPs will replace traditional law firms, some law firms have established partnerships with existing ALSPs, while other firms say they plan to establish their own ALSP affiliates.

“Once an outlier, ALSPs have since shown they can successfully provide the legal services that companies rely on to handle a wide range of legal work across numerous practice areas from commercial law and transactions to government contracting, intellectual property law and licensing, technology transactions, compliance functions, litigation, regulatory law, and more,” California attorney Monica Zent, of ZentLaw, wrote in an online article published by the ABA.

For Natalie Knowlton, supporting some type of regulatory reform is crucial if the ultimate goal is to make legal services more affordable for average consumers.

“Why should we support the current existing monopoly on legal services in light of this extreme need,” said Knowlton, herself an attorney and the founder of Access to Justice Ventures, which helps entrepreneurs develop access-to-justice solutions. “To me, it’s about how can we try new things to solve an old problem.”

Knowlton previously worked with the IAALS, but left 18 months ago to start her organization.

Bednarz, of the IAALS, said lawyers and others who oppose regulatory reforms say more data is needed to prove that these reform initiatives work before they’re implemented, but the problem is twofold: first, the data is extremely limited because these programs are still so novel, and second, attorneys and those who regulate the legal industry don’t often have extensive data collection methods.

Nevertheless, Bednarz said her organization has been made aware that “very few complaints” exist in the jurisdictions that have adopted these reform measures.

“They’re new solutions, and as long as they’re designed in a way that we’re keeping an eye toward consumer harm and trying to mitigate it, I think we have to try it out,” Bednarz said.

Of course, there are detractors who warn against outside ownership of law firms in order to maintain the integrity of the profession.

“Allowing nonlawyers to invest in law firms—essentially becoming the law firm’s shareholders—risks replacing the lawyer’s independent judgment with concerns about maximizing profit, no different from any other business,” the U.S. Chamber of Commerce wrote in a report. “This will have significant adverse effects on clients, lawyers, judges, and the public.”

In September, Page Faulk, the Chamber’s senior vice president of legal reform initiatives, told The American Lawyer that her organization continues to be concerned about reforms such as third-party litigation funding and other forms of outside investment in law firms, since attorneys must be able to continue exercising independent professional judgment “free from external influences.”

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