The ABA creeps sideways on non-lawyer ownership

Cite this Article
Larry Ribstein, The ABA creeps sideways on non-lawyer ownership, Truth on the Market (December 07, 2011),

The ABA is considering loosening the bar on non-lawyer ownership of law firms (HT Law Blog).  Here’s the discussion paper.

For those who are thinking that this move is meaningful, forget about it.  The ABA proposal (which would still have to be approved by the ABA and then by individual states) would permit non-lawyer ownership only if the firm provides only legal services, the lawyers have control, and the lawyers are responsible for the non-lawyers’ integrity and compliance with ethical rules.   The ABA is not considering publicly traded law firms, passive outside investments, or firms (as under the UK’s new “Tesco” law) that offer both legal and non-legal services.  

The ABA’s continued resistance to non-lawyer ownership of law firms is misguided on policy grounds.  Keep in mind that eliminating the ban would not permit non-lawyers to render legal services.  It would simply change the ownership structure of the firms in which lawyers practice.  The idea behind the rule is that non-lawyer owners would emphasize bottom-line profits over proper concern for the client.  But firms, whether or not they practice law, can’t profit by stomping on their customers and sullying their brands.  And who really believes that law as it’s practiced today, in lawyer-owned firms, isn’t a business?  Or that the law business should be protected from competition by other business models? For more on these issues see my conversation with Mitt Regan and Bruce MacEwen.

More important is what the ABA move would do about the cost of legal services: nothing.  The non-lawyer ownership ban has been enacted and maintained by and for lawyers as a way of banning lower-cost provision of legal advice.  Under current rules, many middle class consumers have no reliable reasonably priced way of getting basic legal advice.  The UK rule permitting law practice by alternative business structures was promoted by consumers.  It lets consumers buy legal services from the same businesses (e.g., Tesco) whose brands they trust for many other products and services.  It is a way of bridging the huge current divide between supply and demand for legal services by ordinary non-corporate consumers.

In any event, as discussed in my Death of Big Law and my and Kobayashi’s Law’s Information Revolution, big changes are coming to legal services as a result of significant technological developments and global competition.  The responsible position by the profession would be to try to manage these developments in ways that protect consumers, as in the UK and Australia.  The ABA’s decision to go no further than reconsidering modest proposals it rejected twenty years ago is basically one to bury its collective head in the sand and let the changes happen without the bar’s involvement.  This is not only unwise but irresponsible.