Is it time for nonlawyer ownership? An introduction to ABS

With the exception of Washington State and the District of Columbia, U.S. jurisdictions prohibit:

  • nonlawyer ownership of law firms;
  • nonlawyer management of law firms; and,
  • lawyers from sharing fees with nonlawyers.

Vermont does so through Rule 5.4.

In 2014, the ABA formed the Commission on the Future of Legal Services The ABA charged the Commission with:

  • studying how legal services are delivered, and
  • recommending innovations to improve the delivery of, and access to, legal services.

The Commission tasked working groups and project teams with focusing on specific topics.  To date, the Commission has issued a compendium of white papers, as well as five issue papers. The most recent issue paper solicits comments on Alternative Business Structures.

Today, I will introduce the topic of ABS by summarizing the issue paper.  Then, over a series of blogs, I will dig deeper into various aspects of the issue paper.  I’m presenting it this way – serialized, if you will – because blogs tend to bog down if too long.

The issue paper begins by answering this question: what is an alternative business structure?  The answer: an ABS is any business model for the delivery of legal services that is currently prohibited by the ethics rules.

Next, the paper identifies the 3 principal features that differentiate ABS from traditional law firms:

  • nonlawyer ownership
  • investment by nonlawyers
  • multi-disciplinary practice.

From there, the paper sets out the jurisdictions that allow ABS in one form or another:

  • D.C. and Washington State
  • Australia
  • England & Wales
  • Several other European Countries
  • Singapore
  • Quebec, Ontario, and British Columbia

Finally, the paper lists the principal arguments for and against ABS.

Argument for ABS

  • Increased Access to Legal Services
  • Enhanced Financial Flexibility for Law Firms
  • Enhanced Operational Flexibility for Law Firms
  • Improved Cost Effectiveness & Quality of Services

Arguments against ABS

  • Threat to Lawyers’ Core Values & Professional Independence
  • Will Lead to Less Pro Bono Work
  • Threatens the Attorney-Client Privilege
  • Promised Benefits Not Likely to Happen

That’s all for today.  In the next post, I’ll look at the principal features that distinguish ABS from traditional law firms, and the jurisdictions that permit ABS.