Renee Newman Knake on Corporations, the Delivery of Legal Services, and the First Amendment Part I

totmauthor —  19 September 2011

Last month the New York Times ran an editorial with the headline “Addressing the Justice Gap,” observing that “the poor need representation and thousands of law graduates need work.”  The piece proposed several solutions, but notably absent was the reform most likely to deliver legal services to those in need and to create jobs for unemployed lawyers:  corporations should be able to own law practices and provide legal representation.  It’s not only a matter of managing the justice gap in America in the face of an enduring economic recession and increased global competition; it’s also a matter of First Amendment concern.

Corporations like Google and Wal-Mart are expert in the delivery of goods, information, and services to the public.  They have the capacity to make significant financial outlays into innovative mechanisms for legal representation and await a delayed return on that investment.  Wal-Mart already offers financial and medical services to its customers. It is not difficult to imagine other alternative law delivery processes or tools that might be developed if a company like Google could take the next step to directly own a law practice, or if Wal-Mart could add a legal assistance window next to the bank or health care provider in its stores.  (Indeed, in the wake of deregulation through the Legal Services Act, London-based WHSmith stores will host legal access points through a partnership with QualitySolicitors, a British legal services provider.)

Attorney professional conduct rules should be reformed to permit corporations to own law practices and deliver legal services.   This deregulation has the potential to increase competition, drive down prices, encourage inventive methods for providing legal representation to those who cannot access or afford it, and create new jobs for lawyers.

The American Bar Association historically opposed nonlawyer ownership citing concerns of professionalism and client protection, though the Ethics 20/20 Commission recently approved the drafting of a proposed change to ABA Model Rule 5.4 allowing minority nonlawyer ownership (see here).  But corporations still would be banned from owning the entire law practice.  Minority nonlawyer ownership is unlikely to generate the revolutionary change necessary for providing meaningful legal representation on a mass scale.

This summer, the law firm Jacoby & Meyers (J&M) filed litigation challenging Rule 5.4.   J&M raised a number of constitutional challenges, but most intriguing is the First Amendment claim.  Admittedly, I’m especially interested in this aspect because the regulation of lawyer speech is a scholarly interest of mine, especially free speech protection for advice from an attorney to her client (for my thoughts on this topic see here and here).  But if one looks at recent decisions from the Roberts Court, it appears that a majority might be receptive to the idea that the First Amendment protects the delivery of legal services by a corporation, a subject I’ve written about in Democratizing the Delivery of Legal Services:  On the First Amendment Rights of Corporations and Individuals.

I see the corporation’s right to own a law practice and deliver legal representation as stemming from NAACP v. Button, a 1963 decision in which the Supreme Court held that states cannot ban the delivery of legal services by the NAACP (a nonprofit corporation) because of the First Amendment interests involved.  The Court extended Button to situations beyond civil rights in a series of cases from the 1960s and 1970s: Brotherhood of Railroad Trainmen v. Virginia State Bar (the First Amendment protects the rights of union members to “maintain and carry out their plan for advising workers who are injured to obtain legal advice”); United Mine Workers of America, Dist. 12 v. Illinois State Bar Association (the First Amendment “give[s] . . . the right to hire attorneys . . . to assist . . . in the assertion of . . . legal rights” for union members’ workers compensation claims); and United Transportation Union v. State Bar of Michigan (“collective activity undertaken to obtain meaningful access to the courts is a fundamental right within the protection of the First Amendment”).  The union cases build upon Button in two important ways.  One, the First Amendment is now understood to protect legal advice and advocacy not only about political and civil rights but also other matters.  Two, it is clear that the First Amendment protects collective activity by a corporate entity undertaken to deliver legal services.

Another relevant line of First Amendment decisions are the advertising and solicitation cases from the 1970s.  In Bates v. State Bar of Arizona, the Court held that Arizona’s ban on lawyer advertising violated the First Amendment.  The Bates majority rejected the very same arguments levied against corporate ownership of law practices.  For example, the Court found the Arizona State Bar’s “postulated connection between advertising and the erosion of true professionalism to be severely constrained,” and similarly rejected the Bar’s concern about the “adverse effect on the administration of justice.”  The Court also noted that the advertising ban (much like the corporate ownership ban) “likely has served to burden access to legal services, particularly for the not-quite-poor and the unknowledgeable.”

Two other lawyer solicitation cases deserve mention.  In 1978, the Court decided Ohralik v. Ohio State Bar and In re Primus on the same day.  In Ohralik, the Court determined that the state could ban an ambulance chaser from in-person solicitation but in Primus the Court held that the state could not ban an ACLU lawyer from informing potential litigants about their constitutional rights.  One might reconcile these decisions by looking to the fact that Ohralik solicited for pecuniary gain, whereas the ACLU lawyer offered services free of charge (though still received salary from the ACLU).  And, so the argument might go, it follows that corporations, in seeking a profit when offering legal services, should be treated more like an ambulance chaser than an ACLU lawyer.  I disagree.  A Wal-Mart law type delivery mechanism, for all practical purposes, need not be anything like the proverbial ambulance chaser.  Rather than rushing in to prey on the vulnerable accident victim, we instead would have access to a de-mystified legal services provider, where customers could learn about services in a neutral atmosphere as they conduct everyday shopping.

In Part II, I’ll discuss two recent decisions from the Roberts Court that offer insight about the First Amendment interests of corporations in the delivery of legal representation.

3 responses to Renee Newman Knake on Corporations, the Delivery of Legal Services, and the First Amendment Part I

  1. 

    The Ethics 20/20 Commission has tacitly acknowledged that economic forces will ultimately transform the restrictions on outside capital, while simultaneously refusing to help ease this transition. In its issue paper on alternative business structures, the Commission mentions five approaches for allowing fee-splitting with non-lawyers. Three of these would allow only active investment, while two others would allow outside investment. One of these latter two approaches, allowing unlimited passive investment, has been successfully implemented in Australia after much initial opposition from that country’s bar. The Commission only sought feedback on the three active investment options. (See http://www.americanbar.org/content/dam/aba/administrative/ethics_2020/abs_issues_paper.authcheckdam.pdf, pp. 17-19.)

    My organization, Consumers for a Responsive Legal System, thought it would be remiss if it did not point out the benefits to consumers of allowing innovators greater access to capital, and recommended that the Commission reverse its stance and endorse the Australian model. (http://responsivelaw.org.s113099.gridserver.com/index.php?option=com_content&view=article&id=138). The Commission is expected to release its initial proposal on this issue this week.

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