Research Memo: Closing the Justice Gap with Non-Lawyer Support

Can non-lawyer participation help close the justice gap?

Introduction: Legal tech vendors often talk (earnestly, I believe) about building efficiency into the practice of law, enabling firms to set lower, flat rate prices and, in turn, enabling firms to capture a portion of the $437b ‘latent legal market.’ These billion dollar numbers are a bit back-of-the napkin. Of course they are. If it’s ‘latent’, it’s untapped, hidden, not entirely defined or measured. Folks trying to fill a portion of the justice gap are nevertheless eager to prospect. Technical solutions make for good shovels. What about permits to dig?

On the regulatory side, several states are looking to amend their version of ABA Model Rule 5.4, some already have.1 Among other things, the rule prohibits non-lawyers from holding an ownership stake in a law firm, arguably inhibiting valuable contributions from non-lawyer experts.2 In 1983, the Kutak Commission offered this in the comments to a proposed new Rule 7.5, Professional Independence of a Firm:

… if nonlawyers were prohibited from having managerial authority in a legal services organization, management efficiency could be hampered in private firms and community participation in legal aid would be curtailed.3

The Commission’s report was, in a word, controversial.4 The ABA never adopted the proposed rule permitting non-lawyer ownership. Should it have? Can non-lawyer participation help close the justice gap?

Summary Conclusion: In short, it’s safe to assume so. Opponents of a rule change often note that there isn’t enough evidence to support a conclusion that market-shifting innovation is an inevitable result of a rule change.5 Indeed, UK and Australian regulatory changes produced no conclusive results and only a few US jurisdictions have adopted rule changes. However, ‘more data needed’ is probably not a serious response to a centuries old access-to-justice problem. Two factors make regulatory change a safe bet. First, the history of auto club litigation demonstrates that the latent legal market isn’t merely a hypothetical construct. Second, recent rule changes in jurisdictions like Utah and Arizona, demonstrate that the industry can safely experiment with alternative forms. Thus, the profession has a workable hypothesis:6 non-lawyer ownership of law firms may help close the justice gap.

A Lost History

Most histories of Rule 5.4 start in 1729 with the UK’s Attorneys and Solicitors Act forbidding attorneys from allowing non-attorneys to use their name for profit.7 Other common references include:

  • An 1819 English Court decision invalidating an attorney’s agreement to pay his clerk one-third of profits as a salary.8
  • ABA’s adoption of the Cannons of Professional Ethics in 1908 included Cannon 28, which stated that “[i]t is disreputable to hunt up defects in titles” or to “remunerate attaches” (i.e., no referral fees).
  • ABA’s 1928 updates included Canons 34 and 35, prohibited fee sharing with non-lawyers and rendering legal services to organization members regarding their individual affairs.

What’s the big deal? In simplest terms, fee-splitting makes a partnership, bringing the non-attorney within the practice of law. Regulators feared an outsized influence of profit-seeking partners unhindered by ethical guidelines.9

Was this fear genuine or merely pretext? Early commentators were not blind to the anticompetitive nature of lawyer regulation. But opponents of rule change appear to never have had the burden to prove public harm. This is the story of US Motor Clubs, an important but infrequently cited stopping point in the history of Rule 5.4.

the dashboard of a green car with a radio
Photo by Nick Elmer on Unsplash

In the 1930’s, salaried automobile club attorneys10 offered legal services to club members. In the earlier part of the 20th Century, auto clubs and other associations were neither governed nor owned exclusively by lawyers. Still, they competently delivered legal services. According to a recent Yale Law Review article by Nora Freeman Engstrom and James Stone11, an early version of Chicago’s version of Canon 35 explicitly permitted this, but the Chicago bar amended the rule in 1931 to align itself with the ABA. Freeman and Stone summarize the subsequent suit against the Chicago Motor Club:

After a public hearing before a special commissioner, wherein the Chicago Motor Club introduced copious evidence detailing its services and the Chicago Bar introduced no evidence of any kind (including not a shred of evidence concerning consumer harm),the commissioner rendered his decision. His findings of fact supported the Club’s key contentions. He concluded that the Club had “rendered valuable services to its members and to the communities in which it operates,” and that “leading members of the Chicago bar” had been poised to testify “that each and every lawyer employed by the Chicago Motor Club legal department . . . has conducted himself in a dignified and reputable manner.” He also found that, when it came to handling the cases on their dockets, the lawyers exercised independent professional judgment; they had, in his words, “free reign.”

The article’s authors are careful to note that a lot has changed since the 30’s and the auto club story isn’t necessarily proof that reforming Rule 5.4 will reverse contemporary access to justice challenges. However, they also note that “[i]t was largely undisputed that, at the time the auto clubs’ legal departments were shut down, they were handling thousands of claims each year that other (nonclub) lawyers were unwilling or unable to handle.”12 In sum, the auto club history tells a story of where a non-lawyer governed firm can:

  • operate in a dignified manner, without the ugly commercialization feared by some in the profession13,
  • operate independently, and
  • deliver affordable, quality legal services.

“Nonetheless,” Freeman and Stone write, “where it really counted, the Bar prevailed. Notwithstanding its usefulness, the Chicago Motor Club “‘has been, and is, engaged in the practice of law.’”14

Proposed Amendments

The auto club case arguably suggests the existing rule is more likely to cause harm than it is to prevent it. This maybe hasn’t been lost on the profession entirely. Since at least 1980, rule change advocates have been persistent, though mostly unsuccessful. For example:

  • On January 30, 1980, ABA’s Kutak Commission released its Discussion Draft with proposed amendments to the 1969 Code of Professional Responsibility. This version included a Rule 7.5 which prohibited non-lawyer ownership “unless services can be rendered in conformity with the rules of professional conduct.” As mentioned above, the rule was not adopted. Instead, the ABA adopted Rule 5.4.
  • In 2021, a Florida Special Committee recommended that the Supreme Court adopt a regulatory sandbox but the Supreme Court said, try again.15
  • In 2022, the ABA issued Resolution 402 reaffirming its opposition to rule change following Resolution 115, ‘encouraging regulatory reform.’

To date, only Arizona, Utah, D.C., Australia, and the UK have rules permitting non-lawyer ownership of law firms and any success demonstrated by this experimentation appears to have only influenced advocates, not regulators.

More ‘Data’ Needed

Despite 402’s apparent intent to put the issue to rest,16 the Association of Professional Responsibility Lawyers (APRL) sent a letter to ABA President William Bay proposing a rule change in December 2024. The letter concludes:

APRL believes that the time for change is now. Realistically, the time for change – as evidenced by the successful efforts of the other jurisdictions discussed above – is long overdue; however, changing the rules now that prohibit lawyers from collaborating with nonlawyers and sharing fees is certainly better done late than never.

APRL’s letter provides a great summary of success stories from the UK, Utah, and elsewhere but, here, success is largely measured in terms of risk; i.e., the sky has not fallen. There isn’t much evidence suggesting that experimentation has (or can) meaningfully impact any access to justice challenge.17 The UK’s Legal Services Board probably sums up the status quo best in its 2020 report. Regarding the 2007 Legal Services Act, the report notes:

While the legislation may not yet have led to all the gains its proponents hoped for, it has not precipitated the sorts of problems its opponents had foreseen and has delivered some very real and important successes.

The ‘success’ cited by these resources strongly suggest it’s safe to move forward.18 Similar to clinical trials, worthwhile experimentation can take place within well-defined safety guidelines.

Conclusion

So far, there is not enough evidence to suggest technical solutions alone can fill portions of the justice gap. Nor is there enough evidence to support a hypothesis that regulatory change will get it done. We are in an experimental moment. Both regulators and advocates would benefit from more ‘data.’ That is, additional evidence, personal histories, surveys, and other information19 may outline how a more diverse, less monolithic, legal marketplace safely serves a broad spectrum of persons in need of legal services. We’re in an experimental moment but regulated non-lawyer ownership appears to be a safe bet or, more precisely, it can serve as a safe starting-point for further investigation.

Research Notes

  1. Most notably, Arizona replaced Rule 5.4 in 2001 with Arizona Code of Judicial Administration § 7-209: Alternative Business Structures, Admin. Order No. 2020-173, 1–2 (Ariz. 2020). And Utah created a regulatory sandbox governed by the Office of Legal Services Innovation which . See Utah Sup. Ct. Standing Order No. 15 (2020). Other notable departures from the rule include:
    California: Allows lawyers to share fees with a non-profit organization in more circumstances than just court-awarded fees.
    District of Columbia: DC takes a logical approach by permitting partnerships with nonlawyers so long as they commit to ethical rules, among other requirements. DC R RPC Rule 5.4.
    Florida: Notably, a Florida Special Committee recommended the Supreme Court adopt a regulatory sandbox to test changes to the rule but the Supreme Court said, try again, please. See Final Report of the Special Comm. to Improve the Delivery of Legal Serv., app. A (2021) (pdf) and Letter to Joshua E. Doyle, Executive Director, Florida Bar Association (March 3, 2022).

    Georgia: Allows a Georgia lawyer to work with an Alternative Business Structure (like an Arizona ABS) outside of Georgia and to share fees for that work. GA R BAR Rule 4-102, RPC Rule 5.4
    Rule 5.4 Survey: Download the quick AI jurisdictional survey courtesy of Westlaw Precision. ↩︎
  2. Rule 5.4 Variations of the ABA Model Rules of Professional Conduct: Download ABA’s CPR Policy Implementation Committee document. ↩︎
  3. Am. Bar Ass’n Comm’n on Evaluation of Prof’l Standards, Model Rules of Prof’l Conduct (Discussion Draft 1980)(pdf). ↩︎
  4. See, Michael S. Ariens. The Last Hurrah: The Kutak Commission and the End of Optimism, 49 Creighton L. R. 689 (2016). ↩︎
  5. For an overview of the standard arguments, see this pair of Yale Law Journal articles: Stephen P. Younger, The Pitfalls and False Promises of Nonlawyer Ownership of Law Firms, 132 Yale L.J.F. 259 (2022) and Ralph Baxter, Dereliction of Duty: State-Bar Inaction in Response to America’s Access-to-Justice Crisis, 132 Yale L.J.F. 228 (2022). We uploaded both papers to Gemini and ChatGPT to review additional arguments. Sample prompt: Write a point-for-point response to Younger’s arguments as Ralph Baxter. ↩︎
  6. Oxford English Dictionary, s.v. “hypothesis (n.), sense 3,” September 2024, https://doi.org/10.1093/OED/6773671779. “A supposition or conjecture put forth to account for known facts; esp. in the sciences, a provisional supposition from which to draw conclusions that shall be in accordance with known facts, and which serves as a starting-point for further investigation by which it may be proved or disproved and the true theory arrived at.” (emphasis mine) ↩︎
  7. (2 Geo. 2) C A P. XXIII Available on vLex! A subscription is required, however. ↩︎
  8. Tench v. Roberts, 6 Mad. Rep. 145, n. is cited for this proposition in Alexander Pulling, The Law of Attorneys and Solicitors (full text) at 252 (William Henry Bond 1854). I believe the Mad. citation is for Maddock’s Chancery Reports. The case can be found HERE thanks to the HathiTrust. ↩︎
  9. See for example, John W. Kephart, Unauthorized Practice of Law, 40 Dick. L. Rev. 225 (1935) ↩︎
  10. Other corporate groups were also providing legal services. See John R. Sbuvekty, Review of Recent Activities to Eliminate Lay Encroachments American Bar Association Journal 19, no. 3 (1933). Other groups included Credit Men’s Associations, Property Owners’ Associations, Title Companies, and Trust Companies. ↩︎
  11. Freeman, Nora & James Stone, Auto Clubs and the Lost Origins of the Access-to-Justice Crisis, 134 Yale L.J. 1 (2024) (pdf) and see, People ex rel. Chicago Bar Ass’n v. Chicago Motor Club, 362 Ill. 50, 52, 199 N.E. 1, 2 (1935) ↩︎
  12. Id. ↩︎
  13. See Kephart, note 10 supra (“In [layman’s] hands we witness a degrading spectacle where exists the sordid methods of commercialism, with concomitant solicitation, advertising, cut-throat competition and other deleterious practices, which quickly result in the corruption of the administration of the law). ↩︎
  14. See Freeman and Stone, note 13 supra. A more current and perhaps more complex concern has to do with litigation financing. See, various testimony before the House Oversight and Accountability Committee, “Unsuitable Litigation: Oversight of Third-Party Litigation Funding” (09/13/2023). ↩︎
  15. See the Final Report of the Special Comm. to Improve the Delivery of Legal Serv., app. A (2021) (pdf) and Letter to Joshua E. Doyle, Executive Director, Florida Bar Association (March 3, 2022). ↩︎
  16. Per the resolution: “…ownership or control of the practice of law by non-lawyers [is] inconsistent with the core values of the legal profession.” ↩︎
  17. Also note that the diversity of services and service types enabled by a rule change may make it difficult to identify any singular metric which measures ‘success.’ See for example, Utah’s List of Authorized Entities. ↩︎
  18. Also note that the diversity of services and service types enabled by a rule change may make it difficult to identify any singular metric which measures ‘success.’ See for example, Utah’s List of Authorized Entities. ↩︎
  19. That is, safe for the public. Entry of big players into the market pose a competitive threat to established law firms. In January, Arizona’s Committee on Alternative Business Structures unanimously recommended that the state’s high court approve KPMG’s application for an ABS license. The Supreme Court said, hold on a minute. To date, I find no statement from the Arizona Supreme Court about why the application is on hold. But of course, KPMG is not likely to cover the latent legal market, more likely, they’ll capture ‘middle range work.’ See Artificial Lawyer, If KPMG Can Offer US Legal Services Will It Change The Market? (January 7, 2025). ↩︎