Updates on Leaving a Firm, Tech Competence, and Regulatory Reform.

Today’s post updates/revisits topics I’ve previously discussed:

  • duties to clients when a lawyer leaves a firm.
  • Tech competence: it’s been 16 years (!) since Zubulake.
  • Arizona adopts significant regulatory reform.

Duties to Clients when a Lawyer Leaves a Firm

In September, I posted Leaving A Law Firm: Breaking Up Is Hard To Do.  The post highlights the duties that a departing lawyer and firm owe to clients. It’s based (mostly) on a formal advisory opinion that the ABA issued in 1999.

Then, in December, I posted this update after the ABA Standing Committee On Ethics And Professional Responsibility issued Formal Opinion 489: Obligations Related to Notice When Lawyers Change Firms. 

Update: Last month, the Ohio Board of Professional Conduct issued Formal Opinion 2020-06: Lawyer Departing a Law Firm.  The opinion tracks the most recent ABA opinion.  Summary:

  1. When a lawyer with “principal responsibility” for a client matter departs a firm, the lawyer is required to communicate the impending departure.
  2. Preferably, notice should come from both the firm and the departing lawyer.
  3. The departing lawyer should not notify clients of the impending departure before notifying the firm.
  4. Neither the departing lawyer nor the firm should state or imply that the client is the firm’s or the lawyer’s or take any action that interferes with the client’s right to choose counsel (including a new firm altogether).  Client choice remains paramount!
  5. Given the prior professional relationship, both the departing lawyer and firm may indicate a willingness to continue to represent the client.
  6. If no remaining lawyers can provide competent representation to the client, or if a conflict at the new firm prohibits the client from following the departing lawyer, the firm and lawyer must work to assist the client to find new counsel.

Thank you Professor Bernabe for the tip.

Tech Competence: it’s been 16 years (!) since Zubulake

The blog was founded on the slogan “Competence Includes Tech Competence.”  In January, and following a CLE in which I was fortunate to present with a group of highly competent litigators, I posted Competence & E-Discovery. I think it’s an okay refresher.

Last week, I fell down a rabbit hole of old articles on legal ethics and found an ABA Journal post from 2014: Looking back on Zubulake, 10 years later.  To me, it’s an interesting and informative review of the landmark decision, a decision that, really, thrust “tech competence” into the parlance.

Arizona Adopts Regulatory Reform

Last week, I blogged about the Utah Supreme Court’s decision to adopt significant changes to the Rules of Professional Conduct and the manner in which the provision of legal services is regulated. In short, acknowledging that the rules can serve as a barrier to accessing affordable legal services, the Utah Court issued Standing Order 15 which:

  • allows lawyers to share fees with non-lawyers;
  • allows lawyers to practice in entities that are owned or managed by non-lawyers; and,
  • repeals the rule that prohibits sharing fees with lawyers in other firms.

Update: The day after my post, the Arizona Supreme Court adopted similar reform  Per this press release, the “goal is to improve access to justice and to encourage innovation in the delivery of legal services. The work of the task force adopted by the Court will make it possible for more people to access affordable legal services and for more individuals and families to get legal advice and help. These new rules will promote business innovation in providing legal services at affordable prices.”  The changes:

  • create a process to license paraprofessionals who will be authorized to provide limited legal services in certain types of cases, including going to court with clients;
  • repeal the rule that prohibits fee sharing with a lawyer in another firm; and,
  • repeal the rule that prohibits non-lawyers from having ownership interests in law firms.

Legal Ethics

Maine, Utah, and Reforming Attorney Regulation.

Perhaps it’s appropriate that I visited Maine last weekend.

There’s not much I enjoy more than an early morning run followed by a dip in the ocean. In Maine, I was able to do exactly that each morning. In the surf, I’m like my 9-year old self: my attention focused on the horizon, looking for giant ships and the next big breaker to ride to shore.


What’s that got to do with reforming attorney regulation?

Reform is no longer on the horizon. It’s approaching shore. Whatever the metaphor, I hope that we get on board or ride the wave.

Proponents of regulatory reform argue that the Rules of Professional Conduct impede access to legal services. Three ideas are central to reforming attorney regulation:

  • allowing non-lawyers to provide services that, now, only lawyers are authorized to provide;
  • relaxing the rule that prohibits (a) non-lawyer investment in law firms; (b) sharing profits with non-lawyers; and (c) partnering with non-lawyers; and,
  • relaxing the rule that prohibits lawyers from providing something of value in exchange for referrals.

For an overview of reforming attorney regulation – aka “re-regulation” —  this post from 2Civility is helpful.

Okay Mike, so where’s Utah figure into all of this?

Both on this blog and at CLEs, I’ve expressed frustration with the pace at which the legal profession adapts to change. One of the most-read posts on this blog is this one in which I argued that when it comes to increasing access by authorizing paralegals to provide legal services, we can’t let perfect be the enemy of good.

Which is why I was so excited to learn that last week, the Utah Supreme Court issued Standing Order 15. The order transforms regulatory reform from “talk” to “walk.”

Today, I’m not going to dive into the weeds of the “regulatory sandbox” that the order creates. Rather, I’m going to highlight (1) the changes it makes to the Rules of Professional Conduct; and (2) the reasons that the Utah Supreme Court approved it.

Standing Order 15:

  • allows lawyers to share fees with non-lawyers;
  • allows lawyers to practice in entities that are owned or managed by non-lawyers; and,
  • repeals the rule that prohibits sharing fees with lawyers in other firms.

In addition, but a topic for another day, Standing Order 15 significantly streamlines the lawyer advertising rules.  

Why adopt such significant changes?  Here’s the press release in which the Court announced that it had adopted the order.  It includes the following paragraph:

  • “Justice Deno Himonas who, along with John Lund, past-President of the Utah Bar, led the effort, summed up the need for innovative solutions in the face of America’s access-to-justice crisis as follows, ‘We cannot volunteer ourselves across the access-to-justice gap. We have spent billions of dollars trying this approach. It hasn’t worked. And hammering away at the problem with the same tools is Einstein’s very definition of insanity. What is needed is a market-based approach that simultaneously respects and protects consumer needs. That is the power and beauty of the Supreme Court’s rule changes and the legal regulatory sandbox.’ Now, under the leadership of the Supreme Court and the Bar Commission, which will have an important role in the Innovation Office, Utah will be the first state in the nation to lay the foundation for a truly accessible and affordable, consumer-oriented legal services system.”

This morning, Justice Himonas and John Lund agreed to meet with me virtually to record an interview that will focus on Standing Order 15, Utah’s new regulatory sandbox, and regulatory reform in general.  I will post it as soon as it’s finished.

This is not the last I’ll broach this topic.  Since June, Justice Cohen and I have been participating in a series of seminars put on by the IAALS Unlocking Legal Regulation Project. We’re learning about the very changes that Utah adopted.  By the end of the year, we anticipate being ready to start a more in-depth discussion here in Vermont. 

Stay tuned.


Additional Information on Utah Standing Order 15

Related Posts from this blog

Should we allow nonlawyers to own, manage, and invest in law firms?

With only a few exceptions, 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 the lingo, “alternative business structures” are prohibited.

Last year, I posted a series of blogs related to Rule 5.4 and alternative business structures (“ABS.”)  Among them:

Here’s a summary of oft-cited arguments for & against allowing nonlawyers to own, manage, and invest in law firms:

Arguments 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

The idea didn’t gain much traction in Vermont.  Today, the ABA Journal reports that the State Bar of California has formed a task force to study nonlawyer ownership.  Per the ABA Journal, California commissioned a report that indicated that amending the rules to allow ABS would:

  • “(1) drive down costs; (2) improve access; (3) increase predictability and transparency of legal services; (4) aid the growth of new businesses; and (5) elevate the reputation of the legal profession.”

It’s an interesting concept.  At the very least, I think it’s one worth studying, as Vermont continues to struggle with acccess to affordable legal services.

Image result for alternative business structures

An Opening Skirmish? 2nd Circuit Rejects Challenge to Ban on Nonlawyer Ownership of Law Firms

Rule 5.4(d) of the Vermont Rules of Professional Conduct prohibits lawyers from practicing in or forming a for-profit firm if (1) a nonlawyer owns any interest therein; (2) a nonlawyer holds a position similar to director or officer (or partner); or (3) a nonlawyer can control or direct a lawyer’s professional judgment.

Last year, I posted a series of blogs in which I asked whether it’s time to rescind 5.4 and authorize lawyers to practice in so-called “Alternative Business Structures.”  There are strong arguments in favor of ABS.  Chief among them, the infusion of capital, ingenuity, talent, and expertise in running a business might make lawyers and firms more efficient, more flexible, and better suited to provide clients with access to cost-effective legal services.  My posts aren’t all that original.  Rather, they summarize an ABA issues paper.  Nevertheless, I concluded that nonlawyer ownership is coming.

Josh King is the Chief Legal Officer at Avvo.  For a great take on how a careful and smart implementation of ABS might help both lawyers & clients, I recommend this post from Josh.

Last week, the 2nd Circuit Court of Appeals rejected a law firm’s challenge to New York’s ban on nonlawyer ownership. Jacoby & Meyers claimed that the rule violated the first amendment rights of association and to petition the government on behalf of clients.  In particular, per the ABA Journal, “Jacoby & Meyers  had argued it needed outside investment from nonlawyers to expand and increase efficiency, leading to reduced legal fees and the ability to represent more clients of limited means.”  Stories on the ruling and link s to the opinion ran in the ABA Journal, the Wall Street Journal Law Blog, How Appealing, and the Legal Profession Blog.

I’d be surprised if a constitutional challenge removes the ban on nonlawyer ownership & management from the ethics rules.  Rather, as a profession, we must continue to examine whether the rule makes sense. As noted at Above The Law, our task becomes increasingly important as more & more jurisdictions around the world and within the U.S. report not only the sky’s failure to fall following elimination of the ban, but a sunnier, bluer sky.

Nonlawyer Ownership: It’s Coming – UPDATED

(Updated at 4:32 PM on June 21)

Last month, I posted a series of blogs on whether Rule 5.4 should be amended to allow non-lawyer ownership of law firms (“Alternative Business Structures”).  The series did not generate much response.

I don’t think I can let the issue go without attention. So, as appropriate, I’ll call attention to it.

Joe Borstein of Above The Law has Legal Zoom co-founder Eddie Hartman’s thoughts on whether Alternative Business Structures are the solution to the “quiet crisis” in the legal profession.

Meanwhile, The American Lawyer posts on Big Accounting’s continued push into the legal market.

Finally, today’s ABA Journal reports that  Wal-Mart law firms are here.

In related news, the North Carolina state legislature passed a bill that redefines the “practice of law.”  The bill authorizes online services to provide blank legal documents, provided that the services register with the state bar, refer dissatisfied customers to the state bar, and that the forms include disclaimers warning that blank forms are not a substitute for legal advice.

Non-lawyer Ownership – It’s Coming

Last month, I posted a series of blogs on whether Rule 5.4 should be amended to allow non-lawyer ownership of law firms (“Alternative Business Structures”).  The series did not generate much response.

I don’t think I can let the issue go without attention. So, as appropriate, I’ll call attention to it.

Joe Borstein of Above The Law has Legal Zoom co-founder Eddie Hartman’s thoughts on whether Alternative Business Structures are the solution to the “quiet crisis” in the legal profession.

Meanwhile, The American Lawyer posts on Big Accounting’s continued push into the legal market.

Finally, while this story doesn’t involve non-lawyer ownership of law firms, it might be indicative of a step in that direction: Wal-Mart is leasing space in it stores to The Law Store.

What Say You Wednesday: Time for ABS?

It’s time for another edition of What Say You Wednesday.  Today’s poll question: should Vermont amend (or rescind) Rule 5.4 so as to allow nonlawyer ownership & management of law firms, as well as multidisciplinary practice.

The poll is HERE.

To make an informed decision, here are some options:

  1. Read last month’s issues paper from the ABA’s Commission on the Future of Legal Services; or
  2. Read my series of blog entries on the issues paper.

Of course, as anyone who knows me would tell you, the road to where I find myself today is littered with uninformed decisions.  So, I totally get it if you just want to skip to the vote.  However, to paraphrase the old Gatorade ad, “don’t be like Mike.”

Please forward this blog post to colleagues.

Thank you.

ABS: How’s it doing?

This is the fifth entry in my series on Alternative Business Structures (“ABS”).  I’ve posed the question: is it time to amend (or rescind) Rule 5.4 so as to allow

  • nonlawyer ownership of law firms;
  • nonlawyer management of law firms;
  • multidisciplinary practice.

My posts aren’t original.  Rather, I’m summarizing an issues paper issued last month by the ABA’s Commission on the Future of Legal Services.  My previous entries:

ABS – Arguments Against

A is for Alliteration.

Anyhow, this is part 4 in a series on whether Rule 5.4 should be amended (or rescinded) so as to permit:

  • nonlawyer ownership of law firms;
  • nonlawyer management of law firms; and
  • multidisciplinary practice.

The series summarizes an issues paper on Alternative Business Structures (“ABS”) issued last month by the ABA’s Commission on the Future of Legal Services

Previous entries in the series:

As noted by the Commission, those who oppose ABS offer four main arguments against:

  1. Threat to Lawyers’ Core Values
  2. Decreased Pro Bono Work
  3. Threat to the Attorney-Client Privilege
  4. Failure to Deliver Promised Benefits

Let’s look at each in turn.

Threat to Lawyers’ Core Values

Opponents argue that ABS will lead to a system in which lawyers focus on the bottom line at the expense of their clients’ best interests, sacrificing client loyalty and ceding professional judgment to untrained nonlawyers who are not subject to disciplinary rules.

Among other sources, the Commission’s issues paper cites Nick Robinson’s manuscript: When Lawyers Don’t Get All the Profits: Non-Lawyer Ownership of Legal Services, Access, and Professionalism, 29 GEO. J. L. ETHICS (forthcoming).  On page 14 of his manuscript, Robinson notes that “while some have claimed that non-lawyer ownership will lead to an increase in quality of legal services, it is not obvious this will be the result and pressure for investors for profits may actually undercut standards in the profession.”

There is no doubt that I’m less than qualified to debate ABS with those who study and write about the topic.

However,this is an argument that puts (what I hope is) a wry smile on my face. Implicit in the argument is that lawyers who own their own firms do not let the “bottom line” influence their work. I mean, it’s not like I’ve never heard “mike, once the retainer ran out, my lawyer dumped me.”

Decreased Pro Bono Work

The Commission points out that opponents also contend that ABS will lead to a decrease in pro bono work.  Again, the issues paper cites to Nick Robinson’s manuscript, specifically page 11 where he argues that nonlawyer ownership may “undermine the public-spirited ideals of the profession, making it less likely lawyers in these firms will engage in pro bono or take on riskier cases that may have a broader social benefit.”

Again, color me jade(d), but I’m not so sure that lawyers hold a monopoly on the “public-spirited ideals” traditionally (quaintly?) associated with the legal profession.

Threat to the Attorney-Client Privilege

Per the issues paper, ABS opponents argue that “[i|f nonlawyer partners are privy to privileged conversations between attorneys and clients, courts might refuse to uphold the attorney-client privilege.”  Issues Paper, p. 10, Section 4(B)(3).

As an aside, and as my readers know, the ethics rule is much broader than the privilege.  See, V.R.Pr.C 1.6, Comment 3.  For my thoughts on Rule 1.6 and the disclosure of information relating to a representation, check out these posts:

Failure to Deliver Promised Benefits

Finally, the Commission notes that ABS critics argue that ABS will not deliver the benefits its proponents promise.  For example,

  • THIS STUDY commissioned by the Ontario Trial Lawyers Association concludes that there is “no empirical data to support the argument that [nonlawyer ownership] has improved access to justice” in jurisdictions that have approved ABS.
  • Similarly, on page 14 of his manuscript, Nick Robinson argues that “many other areas of legal work may be difficult to scale or commoditize, meaning non-lawyer ownership will be less likely to occur in these areas or bring unclear access benefits.”
  • Finally, critics contend that firms can attract top, nonlawyer talent with generous salaries & compensation packages that do not include ownership/management interests.

That’s all for tonight.  Next up:  ABS has been permitted for quite some time in jurisdictions around the world.  Some have data.  So….what has been the impact of ABS in jurisdictions where it is allowed?


ABS: Arguments in Favor

This is the third in a series on Alternative Business Structures (“ABS”).  The series focuses on whether it is time to amend the Rules of Professional Conduct so as to allow:

  • nonlawyer ownership of law firms; and,
  • nonlawyer management of law firms; and
  • multidisciplinary practice.

Today, Rule 5.4 prohibits each.

The first two posts in the series are HERE and HERE.

My posts are not original.  Rather, I am summarizing (and borrowing from) an issues paper issued last month by the ABA’s Commission on the Future of Legal Services.

The arguments in favor of ABA appear in Section IV(A), pp. 7-9, of the issue paper.  Per the Commission, proponents offer four benefits of allowing ABS:

  1. Increased access to justice;
  2. Enhanced financial flexibility;
  3. Enhanced operational flexibility; and,
  4. Increased cost-effectiveness & quality of services.

Each relates to the belief that allowing ABS will infuse law firms (and the profession) with much-needed capital and talent.

Increased Access to Justice

Noel Semple is on the faculty of law at the University of Windsor. Professor Semple studies access to justice and, in 2014, published Legal Services Regulation at the Crossroads:  Justitia’s Legionsin which he argued that ABS will improve access to justice.

A quote from Profession Semple appears on page 7 of the Commission’s issues paper.  He makes 3 arguments in favor of ABS.  He writes better than I, so here’s the quote:

  • “[f]irst, [limits on nonlawyer funding] constrain the supply of capital for law firms, thereby increasing the cost which the firms must pay for it. To the extent that this cost of doing business is passed along to consumers, it will increase the price of legal services. Second, bigger firms might be better for access to justice, due to risk-spreading opportunities and economies of scale and scope. Individual clients . . . must currently rely on small partnerships and solo practitioners, and allowing non-lawyer capital and management into the market might facilitate the emergence of large consumer law firms. Large firms would plausibly find it easier than small ones to expand access through flat rate billing, reputational branding, and investment in technology. Finally, insulating lawyers from non-lawyers precludes potentially innovative inter-professional collaborations, which might bring the benefits of legal services to more people even if firms stay small.”

Then, citing a 2014 report from the Canadian Bar Association’s Legal Futures Initiative, the Commission concludes:

  • “[i]n short, it is said that ABS may improve consumer choice and value because additional sources of capital may encourage legal service providers to ‘take greater risks in improving their services.’ That innovation in turn, may allow lawyers to deliver better services at lower prices.”

Enhanced Financial Flexibility

  • Citing a report from the Queensland (Australia) Law Society, the Commission notes that ABS might lead to significant financial benefits, including “asset protection, greater flexibility for raising and retaining capital, greater flexibility for remunerating employees, possible tax advantages, and opportunities to introduce more effective management and decision-making arrangements.”
  • The Commission notes that law firm funding relies almost exclusively on partners and banks.  Then, the Commission quotes this 2008 report in which the author states that in:
    • “[t]his pre-industrial model of financing the firm . . . The owners bear significant risk, which effectively increases their cost of capital and restricts available funding. Part of the risk is from a mismatch of revenues and expenses. Even a fundamentally viable firm may face a liquidity crunch when its bank loans come due and its only assets are accounts receivable and pending cases.”
  • Finally, the Commission suggests that
    • “[p]ermitting nonlawyer investment might also help young lawyers who would be able to afford, for example, to partner with skilled information technology professionals to develop innovative ways to deliver legal services.”

Enhanced Operational Flexibility

I like this one. Essentially, lawyers aren’t the only smart people in the world.

As proponents of ABS point out, precluding nonlawyers from managing law firms certainly precludes one thing:  it precludes firms from employing talented nonlawyers who might offer insightful and innovative ways to improve the delivery legal services.

Essentially, lawyers aren’t the only smart people in the world.

Increased Cost Effectiveness and Quality of Services

This argument centers on multidisciplinary practice (“MDP”).  MDP is a business model in which the owners offer legal services and non-legal services.  For example, a family law practitioner could own a business with a family counselor, providing legal and counselling services to a clients in a “one stop shopping” approach.

The Virginia State Bar laid out the pros and cons of MDP HERE.

The Commission quotes this law review article, in which the authors argue that the:

  • “major benefit of multidisciplinary services is the delivery of an integrated team approach to serving client interests – in other words, providing clients with a ‘one-stop shopping’ approach for problems requiring services in different fields [which leads to]  efficiency that translates into savings of time or money, and ensures the delivery of a higher quality product to the client with lower transaction costs.”

Tomorrow, I’ll have the answer to last Friday’s quiz, as well as a post in which I set out the arguments against ABS, as noted by the Commission in its issues paper.