Law firm ownership and lawyer independence

Malcolm Mercer, who’s been a driving force in the debate around legal service regulation changes in Canada, wrote a terrific post at Slaw titled “A Different Take on ABS – Proponents and Opponents Both Miss the Point.” Malcolm’s post galvanized a lively exchange in the comments section, to which I was drawn and compelled to add some thoughts on two separate but related aspects of legal market liberalization: (a) the affordability and accessibility of legal services, and (b) lawyer ethics, professionalism and independence.

I’ve already written about accessibility elsewhere at Law21, and you can refer to my comments on Malcolm’s article for more. But I thought I’d expand here in some more detail on the second point: the impact of regulatory change on lawyers’ professional conduct. The spectre of “non-lawyers” owning equity in law firms has led some practitioners to express grave concerns about the survival of our ethical standards, and about the wisdom of allowing “non-lawyers” to deliver legal services at all. I think that before we can dive too deeply into these questions, we need to step back and look at the bigger picture first.

Generations ago, lawyers were granted the privilege (not the right) of self-regulation. Using the powers assigned to us through that privilege, we developed, published, and strictly enforce on ourselves several behavioural codes that we refer to collectively as “legal ethics.” (For clarity, “ethics” here refers to explicit normative standards of conduct, rather than the more colloquial sense of “moral behaviour.”) Among the standards we enforce through ethical codes are:

  • service above all to the courts and the rule of law,
  • complete confidentiality of client information,
  • loyalty to client interests, as expressed through conflicts rules, and
  • independence of our counsel from outside influence.

These rules are meant to guarantee to clients and to society generally that we serve the greater good and advance the interests of our clients without partiality. They’re part of the quid pro quo of self-governance: we hold ourselves to very high standards so that no one else feels compelled to step in and hold us to theirs. Nobody, in the continuing debate over liberalization of law firm ownership rules, contends that these standards and goals are obsolete or unnecessary. (Indeed, in the multi-player market that’s coming our way, our ethical standards will nicely double as a competitive advantage.)

Lawyers tend to raise two ethical objections to the changes in legal regulation that have occurred in Australia and Great Britain and that have been proposed in the CBA’s Futures Report. The first is that “non-lawyers” are not bound by lawyers’ ethical standards, and therefore the risk is too great that their clients’ interests will not be protected and may even be abused. The second is that allowing “non-lawyers” to own equity in a law firm fatally compromises our duty of loyalty to the courts and to our clients, because the lawyer will be bound by an additional, higher duty to advance the interests of these “non-lawyer” shareholders. Let’s look at these objections in turn.

1. “Non-lawyer” unfitness: There is, to begin with, a strong case to be made that “non-lawyers” are fully capable of conducting themselves with the integrity and impartiality we expect from lawyers, not least because exploiting or abusing one’s customers is a terrible way to run a business and a good way to wind up in jail. I’ve written before about the specious and self-serving nature of the “non-lawyer” category into which lawyers place everyone in the world except us. But let’s assume, just for argument’s sake, that “non-lawyers” will pose a genuine risk to their clients’ and customers’ interests.

It’s not entirely clear to me why this would be something that should concern the legal profession. Those who hire “non-lawyers,” in the multi-participant legal market of the near future, are not our clients, and we owe them no professional duties. Nor are we their parents or guardians. They’ll have made a choice to hire someone who isn’t a lawyer, and they can reap both the rewards and consequences of that choice. Fundamentally, it’s none of our business.

Lawyers have been granted the privilege of regulating ourselves; nobody, however, has ever granted us the privilege or assigned us the duty to regulate anyone else. (With two exceptions: independent paralegals in Ontario and limited license legal technicians in Washington State.) In almost all cases, law societies, state bars, and other regulatory bodies are not directed in their founding documents to “protect the public.” They are directed to “govern the legal profession in the public interest.” Those are two different mandates. If someone wants to hire a “non-lawyer,” and the “non-lawyer” accepts the engagement, it seems to me that that’s their business, not ours.

2. Corruption of lawyer ethics. This objection, on its face at least, has more merit. It’s reasonable to be concerned that the presence of “non-lawyers” in the ownership structure of law firms could pose a threat to our duties to clients and our independence from outside interests. Even a small risk in this area should be taken seriously, because of the enormous importance of lawyer independence to our professional existence and to the rule of law. But simply because this risk is real and serious doesn’t automatically mean that identifying it is enough to end the discussion. If it’s a risk, let’s look at whether and how it can be managed.  [do_widget id=”text-7″ title=false]

We should isolate, for this discussion, the operation of in-house or public-sector law departments, which very clearly are owned and operated by “non-lawyers.” We’re concerned here with the private bar, providing services to lay clients for whom we assume (though not always correctly) a low level of sophistication. The principles at play in these workplaces are not fully applicable to this conversation — although it’s at least helpful to note that the mere presence of “non-lawyers” in the ownership and financial structure of their “clients” has not been fatal to the independence of these lawyers. “Non-lawyer” status is not an airborne disease.

As it happens, we have an example of a large, multi-national law firm with “non-lawyer” equity owners: Slater & Gordon. If you review the firm’s initial public offering prospectus, you’ll find that among the “risks” disclosed to potential share-buyers was their tertiary position in the firm’s loyalties: the courts first, clients second, shareholders third. Those who buy stock in Slater & Gordon acknowledge and accept that, unlike other businesses where “shareholder value” is (perversely, in my opinion) the only objective, investing in a law firm means accepting a much-reduced level of influence and importance.

I’m not aware of any ethical difficulties Slater & Gordon has experienced, or any accusations that have been made by clients or judges, that public ownership of the firm has corrupted its lawyers’ professional duties or harmed their clients’ interests. The emergence or revelation of such problems or accusations could indeed pose a serious challenge to advocates of “non-lawyer” ownership. But equally, the absence of such problems or accusations, over a period of several years, in two different countries, ought to be factor in the discussion as well.

It seems to me that whether a law firm is owned by lawyers, by “non-lawyers,” or by Martians, the lawyers in the firm still operate under the auspices of lawyer regulation. (Under “entity-based” regulation, which is already in place in Australia and the UK and appears to be coming to Nova Scotia, the firm itself will be bound as well.) If a  regulated lawyer breaks a professional standard, for whatever reason, she will be investigated and punished. Whether her cheques are signed by the managing partner lawyer or by a corporate payroll employee, she is still on the hook for what she does and doesn’t do to advance her clients’ interests and serve the rule of law. There will be no exception granted to a law firm owned in whole or in part by “non-lawyers”; if anything, I expect that ethical scrutiny of such a firm would be several degrees more intense than for lawyer-owned firms.

Now, it might be objected that the influence of a “non-lawyer” equity owner would be more subtle and pervasive than that. The “non-lawyer” would not directly order a lawyer to drop a case or reveal a client confidence on the record; instead, he or she would influence, by their very presence and through various innocuous but well-timed remarks, that perhaps the firm should pursue a different course or be more open about a client’s position. I have two responses to this objection.

First, if we’re now guarding against invisible, inaudible, and theoretical risks to lawyer independence — “this might happen and there’d be no way to prove that it didn’t” — then I think we can concede that the clear and present danger of this risk is not readily apparent. We’re now moving out of the zone of probability, which is a fair and legitimate battleground, to one of possibility, which is unanswerable: no one can ever prove that something undetectable will never happen. And secondly, the assumption at the heart of this objection is the same as the the one above: that “non-lawyers” are less trustworthy, less honourable, and more mercenary than lawyers are — and conversely, that lawyers have more integrity, character, and selflessness than “non-lawyers” do.  I don’t find this line of reasoning especially sound or especially attractive.

As I’ve already noted, I’m not dismissing out of hand the risks posed by regulatory overhaul to lawyer independence: the concern is legitimate, and the stakes for the legal profession are stratospherically high. The case for either side of the debate is not so slam-dunk obvious that further discussion is unnecessary. We should continue to engage on these issues. But let’s engage on probabilities, not possibilities; evidence, not worries; what we know and can reasonably, sensibly anticipate, rather than on what we fear. The right answer is out there. Let’s go find it.

Jordan Furlong is a lawyer, consultant, and legal industry analyst who forecasts the impact of the changing legal market on lawyers, clients, and legal organizations. He has delivered dozens of addresses to law firms, state bars, law societies, law schools, judges, and many others throughout the United States and Canada on the evolution of the legal services marketplace.

Watershed: The CBA Futures Report

This morning, the Canadian Bar Association released the widely anticipated Final Report of its CBA Legal Futures Initiative, “Futures: Transforming The Delivery Of Legal Services In Canada.” I had the benefit of receiving an advance copy a few days ago, so I’ve had time to review the report and prepare some thoughts.

My primary thought is this: The CBA’s report constitutes a watershed moment for the legal marketplace in Canada, and possibly in North America. No document like this has ever been produced by a legal organization on this continent; the only reasonable comparison I can draw (albeit obviously not as groundbreaking) is Britain’s Clementi Report, released nearly 10 years ago. That’s how significant I think the CBA Futures Report could turn out to be: it has the potential to help usher in a new era in legal services on this side of the Atlantic, and to utterly remake the Canadian legal market in any event.

Here’s a link to the full report, one to its executive summary and 22 recommendations, and one to an article in the CBA’s National magazine outlining its major points. This post identifies what I think to be the report’s most important recommendations, with accompanying commentary. I won’t touch on every recommendation, just the ones that I think have the greatest potential impact.

A few key points, however, at the outset:

1. This Report is not CBA policy, not yet anyway: in order for that to happen, the report must be approved by the CBA’s Governing Council. Normally, if I recall my CBA procedures correctly, that vote would occur at the association’s next mid-winter meeting in February 2015. Council might adopt the report in its entirety; it might also adopt only some of its recommendations, and it’s possible (although I think very unlikely) it could reject the whole thing. The next several months of debate and discussion should help indicate which way this will go.

2. The CBA, in case you’re not aware, is solely a lawyer advocacy group. It has no regulatory function, although it frequently advocates in the public interest and makes suggestions to the provincial law societies, which do exercise the statutory regulatory role. So even if CBA Council adopts this report in its entirety, that still doesn’t change the governance of the Canadian legal profession. I imagine, however, that Canada’s 14 law societies might well consider the report to be persuasive evidence (especially in Ontario, where a similar committee is poised to deliver a report on ABSs next spring).

3. I had no input, in case you were wondering, into the direction or content of the Report (I worked at the CBA for 10 years, ending in 2009). I facilitated a #CBAFutures Twitter chat earlier this year, and I provided some informal advice about communications and social media approaches for the project the year before that, but that was the extent of my involvement: this report arrived as new to me as it is to you.

With those points in mind, here we go:

1. Flexibility in Business Structures

Lawyers should be allowed to practise in business structures that permit fee-sharing, multidisciplinary practice, and ownership, management, and investment by persons other than lawyers or other regulated legal professionals.

Nothing like starting with a bang, is there? The Futures Committee recommends a nearly complete liberalization of the regulations that govern lawyers’ business structures. MDPs aren’t all that dramatic a change anymore — they’re already available in some Canadian jurisdictions, albeit with various restrictions on non-lawyer control — but fee-sharing with non-lawyers is a major development, one that hasn’t received as much attention recently but that could have a significant impact on solo and small-firm practices.

But the big-ticket item — the one that will dominate headlines and conversations — is the recommended approval of law firm ownership, management, and investment by non-lawyers. Note that there are no qualifiers, here or elsewhere in the report, about controlling percentages of ownership. Scotland, for example, allows up to 49% non-lawyer ownership in order to maintain lawyer control, and British Columbia’s 2011 report on Alternative Business Structures spoke approvingly of this middle way. The CBA, by contrast, has gone all in — and wisely, I think. Minority non-lawyer ownership is neither fish nor fowl: too much control for traditionalists, but not enough control to actually change the way firms run, leaving nobody happy. If you’re going to start a revolution, you don’t bring toy guns to the barricades.

The CBA, to its credit, has struck at the heart of the argument over how lawyers should be permitted to structure their businesses. Recommendation #1 will be seen, correctly, as the crux of this report and the vanguard of the recommendations that follow, and it will be the main battleground between traditionalists and liberalizers. If this recommendation is defeated or watered down before adoption, this report loses much of its impact, and many of the subsequent recommendations, even if passed, will feel toothless. If it’s approved, everything afterward will change.

4. Alternative Business Structures

Non-lawyer investment in legal practices should be permitted, but only on a carefully regulated basis as follows:

[My summary of what look like the key conditions:

  • An ABS (along with its lawyers) is to be regulated exactly as a law firm would be, with the same fiduciary, ethical, candour, and conflicts obligations to clients as a law firm has, and it must advise clients solely in their interests;
  • Non-lawyers can deliver legal services if they’re effectively supervised and controlled by lawyers;
  • The ABS, its owners and its shareholders may not access privileged client information without express client consent and then only for the client’s benefit;
  • The ABS must purchase legal malpractice insurance no less than required for lawyers but increasing with the size of the ABS.]

None of these restrictions seems unreasonable to me: most seem simply to confirm that the level of regulatory scrutiny currently applied to law firms should be applied in equal measure to an ABS. That’s no small thing: the report might have recommended higher governance standards for ABSs, but it did not.

The requirement of lawyer supervision of non-lawyer legal service providers is one that is already applied within most law firms anyway, and while it’s possible this requirement might eventually prove unnecessary, there’s certainly no harm in adding it now, especially if it helps calm traditionalists’ fears (ditto for the insurance requirement).

5. Fee-sharing with and Referral Fees to Non-Lawyers

The FLSC Model Code Rules should be amended to permit fee-sharing with non-lawyers and paying referral fees to non-lawyers, subject to the following:

[My summary of what look like the key conditions:

  • Existing conflict, confidentiality, privilege, and candour rules fully apply;
  • The client must receive full disclosure of, and discuss with the lawyer the relationship with, the fee-sharer and of the shared fee, which itself must be fair, reasonable, and fully accounted; the fee cannot be contingent and the referral cannot be “exploitive”;
  • The lawyer and client must discuss client expectations arising from the referral and mutually agree on the basis of the retainer.]

This recommendation should be most relevant and useful to solos and small-firm lawyers, because it should provide them with alternative sources of revenue (and giving firms access to novel financing sources is one of the main purposes of liberalization). What I like best about this recommendation, though, is that it brings out into the open all the fears and suspicions that lawyers have always carted around concerning fee-splitting with the dreaded “non-lawyers,” and it forces us to confront them head-on.

It’s a (generally unspoken) article of faith among traditionalists that fee-sharing with non-lawyers inevitably “corrupts” the legal profession, although to my knowledge, no one has established this belief through either sound argument or specific examples. I’d listen to those arguments if they were forthrightly made and stood up to scrutiny; but rarely is either the case. This recommendation reads like a refutation of lawyers’ unconscious assumption that non-lawyers are fundamentally less moral and ethical than we are; I look forward to hearing someone argue that assumption explicitly, in public.

6. Delivery of Non-Legal Services by MDPs and ABSs

MDPs and other forms of ABSs should be permitted to deliver non-legal services together with legal services on the basis that [the same client , confidentiality, and ethical protections that we’ve encountered already, but with this interesting addendum:] If the public interest demonstrably requires that some non-legal services should not be provided together with legal services, the rules should so provide. Otherwise there should be no restrictions. [do_widget id=”text-7″ title=false]

These new entities probably will want to deliver non-legal services as well, so it makes sense to start creating a regulatory framework for that (although it will be very interesting to see how lawyers choose to define “non-legal services,” and what impact that definition might have on subsequent attempts to enforce the “unauthorized practice of law”).

But that last sentence is intriguing: it sets up a presumption in favour of the authorization of non-legal services delivery, overcome only by a demonstrable public interest. The report could have created the opposite burden: no non-legal services, unless the ABS can demonstrably show there is no threat to the public interest. The report chose not to do so.

8. Compliance-Based Entity Regulation

Compliance-based regulation of legal practices should be adopted to promote ethical best practices as a supplement to existing rule-based regulation of individual lawyers. Under compliance-based regulation:

  • law firms would be required to register with the law societies;
  • law firms become regulated entities upon registration;
  • law firms would be required to designate a lawyer with whom the law society may deal on behalf of the law firm and who is responsible for overseeing law firm regulatory compliance; and
  • regulation of law firms would include the requirement of supplementary compliance-based regulation to promote ethical best practices.

Now, this is interesting. As mentioned above, the CBA itself has no regulatory powers, and the law societies have always politely made it  clear that such issues are entirely within their jurisdiction. But compliance-based entity regulation is an idea whose time is rapidly approaching, if it’s not already here: Australia and England have already adopted it to varying degrees, and some Canadian law societies are taking a very close look at it. The Nova Scotia Barristers’ Society, in particular, is making groundbreaking progress in this direction, and Ontario’s ABS Working Group has also explored the issue. Approval by CBA Council of this regulatory approach would be interpreted as a strong vote of confidence in this direction and could signal a tipping point towards its widespread adoption in Canada.

10. Effective Supervision of Non-Lawyers

The FLSC Model Code Direct Supervision rule should be revised to require effective supervision rather than direct supervision. …

This recommendation, previewed in #4, goes on to explain and qualify this approach in some detail, but the key distinction has already been made: substituting “effective” for “direct” supervision. The practical outcome is to relieve lawyers of the need to hover over their non-lawyer employees, monitoring or checking everything that they do, which “direct supervision” implies. “Effective” suggests that as long as there are systems and procedures in place that work to maintain acceptable standards of conduct and activity by non-lawyers, the lawyer need not concern himself or herself with more than the normal supervisory process applied to trusted colleagues of any description.

19. Structured, Rigorous and Consistent Pre-call Training

There should be a structured, rigorous, and consistent approach to pre-call training to ensure new lawyers have all the skills and knowledge required to practise safely and effectively.

This looks like a reference to the struggling articling system, which is in the throes of upheaval and can’t be asked to function much longer as a de facto competence qualification process. The key word here is “training,” which is quite a different concept than “experience,” the usual way in which articling is described. Articling is indeed a great way to “experience” what it’s like to be a lawyer; but that’s not the same thing as being given “training” in how to be a lawyer. I wonder if this isn’t a backhanded vote of confidence for Ontario’s Law Practice Program, which could offer an alternative qualifying route to articling, one that emphasizes “training” over “experience.”

21. Parallel Legal Programs

Educational providers should consider creating parallel programs in areas such as legal technology, in college or other environments, or incorporated into law school education, to educate and train new streams of legal service providers which may include lawyers.

Many of the recommendations in this report touch on legal education, but they’re not nearly as sweeping as those related to the regulation of lawyers and their business structures. Perhaps that’s an acknowledgement that the CBA, like other organizations, isn’t in a position to bring about any sort of change in law schools, no matter how much such change might be needed and desired. But still, the report has no difficulty stepping directly into the law societies’ regulatory back yard, so one has to ask why a similarly bold incursion wasn’t made onto law schools’ lawn.

In any event, this is an excellent suggestion, one that law schools should rush to explore and perhaps implement. It’s increasingly obvious that new legal professionals with innovative skill sets and job descriptions will grow in the years to come, at the expense of traditionally educated law students. Law schools looking for a growth area should already be drafting curricula for Legal Knowledge Engineers, Legal Process Managers, and the like — before someone else does. There are now more than 5,000 trained paralegals in Ontario, not one of whom received his or her paralegal training from a law school. It would be a shame for the law schools to miss the same boat twice.

22. Continuing Professional Development

Continuing professional development should be designed to meet lawyers’ needs through the stages of their careers and reflect identified and emerging client needs. Legal regulators should adopt consistent outcome-based national standards for CPD. Research should be undertaken to measure any link between quantity or input-based CPD and competence.

This is the report’s final recommendation, and it caught me by surprise. I’ve written before about the fundamental problems with how CLE is mandated and delivered, especially the problem of demonstrating its effectiveness. This recommendation tackles these issues and more, declaring that CPD’s purpose is to meet the evolving needs of lawyers and clients (which reads to me like a call for more practice- and client-related information and training), that there should be CPD standards grounded in practical outcomes, and that the assumption that traditional CPD correlates with competence should be tested (that last point, if studied and debunked, could change CPD worldwide). Everyone will have their own rooting interest for one of these recommendations; this is mine.

As mentioned, I’ve only highlighted some of the report’s recommendations; others might strike you as more significant, and you might have a different take on the ones I’ve explored. If so, let us know what you think in the comments. I truly have no idea if CBA Council will approve this Report, partially or in its entirety, and whether such approval would prompt one of more law societies to implement some of these recommendations through regulatory review. The Report has only just entered the public sphere, and the forthcoming commentary and conversations should be fascinating.

But I go back to my opening assessment: I’ve seen a lot of reports from a lot of organizations about “the future of law,” and I’ve never seen one as powerful, wide-ranging, and apparently serious as this one. Several U.S. sates, as well as the American Bar Association (through its new Commission on the Future of Legal Service Delivery) are considering many of the issues highlighted above; I can’t help but think that this report could be cited as persuasive authority by those who favour (as I do) the liberalization of legal market regulation and legal service delivery. No matter what changes actually result from this report, its release changes the conversation about legal regulation in North America.

Jordan Furlong is a lawyer, consultant, and legal industry analyst who forecasts the impact of the changing legal market on lawyers, clients, and legal organizations. He has delivered dozens of addresses to law firms, state bars, law societies, law schools, judges, and many others throughout the United States and Canada on the evolution of the legal services marketplace.

The MCLE question no one wants to ask

Here’s a conversation I sometimes like to imagine, between an elected official in the government and a representative of a state bar or law society.

“So, I understand that law is a self-governing profession, and that you’re the governors.”

“That’s right.”

“I assume you know that self-regulation is a privilege, and that the government allows you to oversee various matters that would otherwise fall within our jurisdiction.”

“Of course. Lawyers’ independence from government is critical for us, so we’re zealous about regulating ourselves, in the public interest, to maintain it.”

“How does that work in practical terms, though? For instance, how do you make sure lawyers are competent enough to serve their clients?”

“We’ve instituted mandatory continuing legal education, or MCLE. Lawyers must complete a certain amount of post-call education every year.”

“Do you mandate specific courses lawyers must take or skills they must learn?”

“No, we generally allow lawyers to choose courses based on their own interests.”

“I see. Do you test them on what they’ve learned in these courses?”

“Well, no. But they always receive binders of materials that they can bring back to their offices.”

“Uh-huh. How do you know they’ve even attended these courses?”

“Well, they report it in their annual filings. But they wouldn’t lie about that. They would risk serious discipline if they were found out.”

“Okay, let me ask you this: Let’s assume every lawyer in your jurisdiction completes the full amount of CLE you prescribe every year. Does it work?”

“Does what work?”

“Does mandatory CLE work? Does it ensure that your lawyers are competent? Are there studies establishing that MCLE verifiably improves the quality of legal service by lawyers?”

“Uh, none that I’m aware of.”

“No? Do you mean in this jurisdiction only, or in any jurisdiction?”

“Er, any jurisdiction, really.”

“Alright, let’s back up. How about ordinary CLE, the non-mandatory kind: are there any studies proving that taking CLE is directly and causally related to maintaining or improving lawyers’ competence?”

“[long pause]….”

You see my point. There might be jurisdictions where the MCLE requirements are stronger and more specific than what I’ve hypothetically described above, but if so, there aren’t many. The foregoing conversation is quite plausible — frighteningly so, if you’re a regulator.

Mandatory CLE is the rule in 44 of 50 US states and in eight Canadian provinces, although curricular and reporting requirements vary across jurisdictions. In every state and province, however, the original impetus for mandating CLE was the same: we need to ensure lawyers are up to date on the law in their areas of practice, thereby maintaining lawyers’ competence and fulfilling our self-regulatory requirements. At least, that’s what I assume: I’ve not been able to find a really fine statement of MCLE’s purposes on the website of any legal regulator that imposes it.

Generally, the reasoning in support of MCLE seems to be implicit: CLE makes you a more knowledgeable lawyer, which makes you a better lawyer, and we want to mandate better lawyers. QED. It’s a great idea, obviously. But is it true? Does requiring lawyers to take a minimum amount of CLE every year make them better at what they do? Intuitively, one supposes that it does, but intuition is not evidence in any court. Can it be proved? Has it been proven?

I’ve spoken with some of the smartest minds in lawyer professional development and asked them if they’ve ever seen a study showing conclusively that MCLE is causally connected (or even strongly correlated) with lawyer competence. None of them has. Nobody, as far as I can tell, has published a study proving that even ordinary, voluntary CLE produces better lawyers. The benefits of CLE can be reasonably assumed, but apparently that’s all they are: an assumption. And mandatory CLE is an assumption squared.

If you want an excellent example of how messed up the legal profession has become over MCLE, read this report of the Supreme Court of New Jersey that led to the state becoming the 44th to approve MCLE in 2007 (HT to Michael Williams). Here’s how the report dispensed with the threshold questions of MCLE’s necessity and effectiveness: “[W]hat reasons, other than the absence of empirical data, mitigate against making CLE mandatory? We have found few, if any.” I’d love to see the reaction of a New Jersey Supreme Court judge to a factum that included this line of reasoning in its arguments: “We have no empirical data to support our position. But there is very little, if any, evidence against it, so we ask this court to rule in our favour.”

I can think of three significant reasons why no one has successfully demonstrated a causal link between MCLE and lawyer competence.

1. It’s very difficult to measure competence. And even more difficult, for that reason, to measure increases or decreases therein. I’ve written before that competence testing in the law tends to be forensic: we find out which lawyers are incompetent only after they wreck a client’s case or their own careers. But defining “competence” for a lawyer is extremely tricky: what standards do you use? Should those standards vary according to practice area, year of call, degree of oversight or autonomy, geographic location, sophistication of clients? How do you test for competence? Who pays for the process? None of these questions has an easy answer. But they are all good questions, and the public whom lawyers serve has a right to know that they’re at least being asked, if not answered. As far as I can tell, the legal profession is not even asking.

2. It’s in nobody’s interest to question MCLE. Continuing legal education is big business, and some of the most heavily invested players in the market are regulatory bodies. The people who decide that lawyers must take CLE are often the very same people who sell CLE to lawyers, which by any standard is a glaring conflict of interest. Many voluntary bar associations are kept afloat in part by CLE revenue, and they view MCLE as manna from heaven. And frankly, lawyers themselves, even though they might not love MCLE, have learned to live with it by gaming the system: sitting in the back of the room checking emails during a lecture, or logging in to an online CLE session and doing billable work with the sound off. It’s a reasonably cozy arrangement.

3. There isn’t any causal link between MCLE and lawyer competence. We might as well get that out there.

None of this may be new, although I’ve seen very few people talk about it openly. But the problem remains: what could a regulator say if a legislator started asking the questions at the start of this post? Should CLE be mandatory? If so, why? How should it be structured, and how should its effectiveness be measured? Here are my suggestions for dealing with this issue:

1. Attend to the absolute basics. A regulator should ask itself:  “What must we ensure that lawyers know, and can do, in order to maintain baseline professional competence that satisfies the standards of self-governance?” Regulators can answer that question, I think, by looking at where lawyers make the most mistakes, and start there. Every regulator and/or professional insurer keeps close track of the nature and cause of complaints and malpractice claims against lawyers. It is well-known that “knowledge of the law,” the subject of 90% of all CLE programming, is nowhere near the top of the list. Generally speaking, here’s where lawyers are getting in trouble:

  •  Failing to establish clear expectations at the start of the client relationship.
  •  Failing to keep clients informed on a timely basis.
  •  Failing to respond to client inquiries in a timely manner.
  •  Failing to identify and avoid conflicts of interest.
  •  Failing to maintain lawyer-client confidentiality.
  •  Failing to ensure security of client information.

Your mileage may vary according to your jurisdiction, but these are the basics that recur state to state, province to province, year after year. Yet I’m not aware of a single jurisdiction that specifically mandates education in these areas, and I’m aware of some that won’t even accredit business- or professionalism-related courses that would cover these topics. Lawyers need to know how to operate a law practice in a viable, ethical and professional manner. If they did, they would commit fewer basic errors and incur fewer penalties. So figure out how many hours would be required to deliver this information, add it up, and there’s your minimum MCLE requirement.

2. Make the knowledge tangible. How do you test this knowledge? Provide lawyers with checklists, templates, protocols and step-by-step processes they can follow to check for conflicts, issue comprehensive retainers, and keep clients continuously informed. Then have them draw up a sample retainer, list the steps involved in checking for conflicts, and describe what they do to keep in touch with clients. Throw in a few other ethics or professional responsibility questions, if you like — every lawyer should be able to answer one or two of those. These are the fundamentals of lawyer professionalism: lawyers can learn them, and their learning can be tested.

3. Monitor the signals of competence. How do you know this is working? Track the number of complaints reduced and malpractice claims reduced year over year. That might not be direct proof of causation, but if the trend lines are strong enough, it would be pretty persuasive correlation. And a really good study would back up the quantitative results with qualitative data derived from focus groups, lawyer interviews, insurance experiences, and so on. Ask yourself: what would the government look at in order to measure improved levels of lawyer competence? They’d probably look here.

There’s a lot more I could talk about in this area — the wisdom and feasibility of mandating substantive-law CLE, the relative merits of online delivery, the best way to teach skills (as opposed to knowledge), the role of private-sector CLE, and perhaps most importantly, rethinking the entire traditional methodology of post-call lawyer learning. But this is where regulators can start, at least, to redefine and reconfigure the profession’s approach to mandatory CLE.

The question nobody in the profession wants to ask about MCLE is, “Does it work?”, because the implications of a negative answer are deeply problematic. I understand that. But we still need to ask the question, and there are ways to answer it that would satisfy any outside inquiry. So let’s ask it already.

Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.             

Who should have the right to own a law firm?

And so the floodgates have opened, and here come the “non-lawyers” surging into the law firm ownership stream. The Legal Services Act‘s long-awaited authorization of Alternative Business Structures in the UK took effect in January. Within the first two weeks of February, here’s what followed (all transactions unofficial until approved by the Solicitors Regulation Authority, which so far has received 121 ABS applications):

Now, at long last, we get to test-drive the worst-case scenario. Ever since the implications of Sir David Clementi’s commission recommendations were first absorbed — even before that, since Queensland made the legislative changes in 2004 that allowed its law firms to float on the stock exchange — we’ve been hearing that non-lawyer ownership of law firms was the beginning of the end, the steepest of slopes down which professional independence and dignity would inevitably slip. All the arguments up to this point, pro and con, have been theoretical. Now we get to see — in a £40 billion legal market anchored in one of the world’s great financial city-states — what the practical actually looks like.

You might have noticed that all three of these ABS pioneers are practitioners of personal injury and/or insurance law, which are essentially both sides of the accident-compensation coin. Their leadership in this regard make sense — personal injury lawyers have long been the profession’s unsung pricing innovators (cf. contingency arrangements), while insurance companies watch their legal costs extremely closely and don’t hesitate to make aggressive moves to reduce them. We expected that ABS expansion might first occur in consumer-side practices such as wills & estates or family law; but with these firms, we get to see both consumer and corporate interests take a dip in the ABS pool and test the waters.

What can we now expect? At this early stage, specific predictions are obviously impossible. But it’s safe to say that some of these and other future experiments will fail — the wrong fields were entered, the wrong firms were chosen, the execution was ham-handed, bad luck intervened, etc. Equally, however, we can be sure that some will succeed, often spectacularly: massive publicity, booming business, satisfied customers, rising firm values, continued expansion, etc.

What we won’t see is across-the-board failure of the ABS experiment, because there’s nothing fundamentally wrong, from a market perspective, with the ownership model. There’s no reason why law firms run by non-lawyers should be less successful than those run by lawyers — in fact, there are many reasons why the opposite should prove to be the case. If you’ve worked for or with lawyers, you can probably think of several right off the bat.

But what drives the opponents of non-lawyer ownership of law firms isn’t the likelihood that these businesses will fail — they’d probably concede that some of these operations will do very well. Their argument is that by allowing control of law firms to pass out of our hands, lawyers will lose our professional purpose and identity — we will have sold our souls for private equity gold. Not only do I not subscribe to these arguments, I think they reveal the fundamental problem at the root of our profession’s vulnerability in this new market.

A concise example of the arguments favouring lawyer-only law firm ownership is contained in this Wall Street Journal Law Blog interview with Robert C. Weber, general counsel of IBM. It should go without saying, here at the outset, that Mr. Weber deserves enormous respect for his position and accomplishments, and that his clear concern for the good of the profession and the clients we serve is one that every lawyer should share, as I certainly do.  But I think there are problems with the arguments he puts forward in his cause. I want to identify three:

“When the world was such that lawyers were able to raise their rates 5%, 6%, 10% a year… and profits per partner at big firms and small were outpacing the GDP, you didn’t hear about [non-lawyer equity in law firms].” He said the profession has grown more selfish in recent years and less focused on clients, which, in turn, has given the idea of outside ownership room to grow.

“Now it’s not ‘I’m doing something good for society and my clients’ — it’s ‘How far can I push things to maximize my personal potential,’” he said. “All you need to do is open the paper and read about groups of partners jumping from one firm to another. The notion of partnership has degraded at these mega law firms.”

This argument, it seems to me, actually demonstrates that the evils of non-lawyer ownership against which we’re being warned have been here for awhile. Greedy firms, selfish lawyers, disloyal partners — we’ve managed to achieve all these outcomes without any assistance from non-lawyers at all. The current lawyer-owned law firm business model, with its rictus fixation on annual partner profit, produces unpleasant and undesirable lawyer behaviour all on its own. Non-lawyer ownership, whatever its real and imagined faults, at least has the virtue of requiring a sustainable, long-term rise in the value of the business, accomplished through mature management and forward-thinking research and investment. Law firms don’t need to fear equity shareholders obsessed with short-term profit who’ll empty the entire piggybank into their pockets every year. They’ve already got those.

The purpose of the rules of professional conduct for lawyers is to protect the integrity of the attorney-client relationship and guide decision-making based on the client’s best interest, Weber said. “Lawyers have a separate set of rules that are used as a defense of the profession policing itself. Once we get to the point that we start behaving like any other business, then I would take the position that we are forfeiting our right to self-regulation,” Weber said.

What’s interesting, however, is that the loss of self-regulation didn’t result from non-lawyer ownership in Australia or the UK — it preceded it. Those jurisdictions took self-governance away from lawyers because lawyers’ self-regulating bodies had failed to curb lawyers’ cavalier treatment of clients or to respond adequately to client complaints. The state didn’t suddenly notice that law firms were behaving like businesses and therefore no longer deserved self-regulation — they noticed that lawyers, in lawyer-owned law firms, were serving their own interests above those of their clients and the public. Law firms have always behaved like other businesses because they’ve always been businesses, albeit with far less sophisticated management.

“I can tell you the way of the world is that incrementally those protections [suggested by the ABA] will begin to go away and non-lawyers will have more and more say, and this profession will have given up not only our independence but our rightful differentiation from a business.” He went on, “The only way you could say that’s not going to happen is to ignore human history, to ignore the example of the investment banks and to say lawyers really are different, better people by nature than others. As much as I love lawyers, that isn’t the case.”

Hang on — these two statements don’t jibe. The first says that law firms are differentiated from other businesses because they’re run by lawyers, clearly implying that lawyers are a cut above the average businessperson when it comes to professionalism and scruples. The second says that no, lawyers actually aren’t any different than other businesspeople, that we’re just as prone to the temptations of greed and selfishness as anyone else. Which is it? (It’s the second, of course.) This is important, because it goes to the heart of this debate. When we say, as Mr. Weber and others say, that lawyer-run law firms are better and more admirable and more desirable than firms run by non-lawyers — what exactly do we mean by that?

What we mean, of course, is that we’re better. We have higher ethical standards, better behavioural norms, more high-minded professional concerns than everyone else. That’s what the overused term “non-lawyer” really means, doesn’t it? We’re the only profession I can think of that divides the world into “us” and “not us” — have you ever heard of “non-plumbers” or “non-nurses”? We do this because we really believe, in our hearts, that there are two types of people — lawyers and everyone else — and we are certain that we’re the wiser, nobler, and more responsible segment. That’s why we’ve never been able to come up with a better term than “non-lawyer” — it’s because we don’t need to. It’s perfect. It says everything we believe about ourselves.

And it’s folly. Look, I’m a lawyer, and I’m proud of it. I’ll be the first to jump out there and defend us against patently false accusations that we’re worse than other members of society. And I’ll be the first to say that lawyers, at our best, are extraordinarily civic-minded, responsible, generous — leaders in and pillars of our communities. But it’s delusional for us to believe that we’re the only people who answer to that description. It’s the worst kind of elitism to maintain, even implicitly, that we occupy higher moral ground than everyone else. But fundamentally, that’s the belief that underlies opposition to non-lawyer ownership of law firms.

I call this “lawyer exceptionalism” — the belief, held by lawyers and lawyers only, that our professional standards, ethical training and higher calling places us in a separate and better category than those without our advantages, both making us socially indispensable and justifying special treatment. You might never have articulated it in so many words, but I’ll bet that subconsciously, that idea stirs feelings of recognition and affirmation. It’s an assumption that was planted in our minds in law school and has been growing quietly in all the years since.

If lawyer exceptionalism were valid, I’d expect lawyers to be unusually exemplary in their personal and professional conduct, law firms to be models of outstanding corporate behaviour, and the legal system to be as fair and accessible as this life will allow. You and I both know, of course, that that’s not the case. We know it because we’ve dealt with too many lawyers, spent time inside too many law firms, and met too many people who can’t afford or even understand the justice system. Mr. Weber referred to the crumbling behavioural standards within increasingly profit-hungry law firms, and people inside those firms could provide plenty of ugly examples.

A legal marketplace run solely by lawyers has successes to its credit — but also failures and missed opportunities. If we really expect to defend lawyer control of law firms — not to mention the legal market itself — we need to mount an airtight, categorical case that we have consistently placed the interests of our clients, our communities and our societies ahead of our own. Anyone want to go first?

Here’s what I think is going to happen when non-lawyers have the right to own law firms. Some firms owned and managed by non-lawyers will turn out to be very profitable businesses, some will show mediocre performance, and some will consistently lose money and eventually fold. Equally, some of these firms will turn out to be exceptional businesses that genuinely increase access to justice, while some will be unimpressive peddlers of legal services and some will be lousy businesses that make employees and clients equally miserable. In other words, I expect non-lawyer-owned law firms to be pretty much the same as lawyer-owned law firms, because I happen to think that lawyers and non-lawyers are just as good and just as bad as the other. The primary market difference is that non-lawyer-owned law firms will be far more efficient and will offer far more affordable services.

But maybe I’m wrong. Maybe lawyers really are better than non-lawyers, and maybe law firms run by non-lawyers will prove to be a scourge of society. There is, as it happens, only one way to find out for sure. Lawyer-owned law firms need to prove, in direct competition with non-lawyer-owned law firms, that they’re better — better for clients, better for lawyers, better for staff and better for society. The legal profession has talked a good game for a long time, but it’s never had to actually play that game, until now. The flag has dropped in England & Wales. The competition is on. May the best model win.

Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.

Fixing the failings of new lawyer training

Last week, I contended that when it comes to the current lawyer admission process, law schools are part of the problem and show little interest in being part of the solution. Two articles published since then do give me some hope for the academy, both from Canadian law school deans: “Five new developments to reshape Canadian legal education,” by Lorne Sossin at Osgoode Hall Law School in Toronto, and “The Canadian Lawyer in the 21st Century,” by Ian Holloway at the University of Calgary Faculty of Law.

But that’s as much as I want to say about the schools, because what we’re really talking about in these conversations, when you get right down to it, is the competence of practicing lawyers. The legal profession is concerned with competence in two ways: at the start of a lawyer’s career (what I’d call Initial Professional Development, or IPD) and then throughout the course of the lawyer’s career (what we already call Continuing Professional Development, or CPD). Let’s begin with the first one and tackle the second one next week.

The bar has a self-evident interest in ensuring that new lawyers enter the profession with enough knowledge, skills and experience to provide reliable legal services at a purely functional level. It’s the responsibility of lawyers, as self-regulating professionals, to set and enforce these basic, minimum standards — to oversee this Initial Professional Development — in order to fulfill our mandate to protect the public in the provision of legal services. So far, so good.

Here’s the problem: Initial Professional Development for new lawyers is a mess. It’s been cobbled together from a mishmash of activities, some mandatory and some optional: a law school education, a summer stint in a law firm, a bar admission course, a bar exam, an articling or trainee contract, and so forth. These measures overlap in some areas and leave other areas completely unaddressed: a new lawyer might have sat through three primers on real property law, for example, but never have the opportunity to run a simulated mediation.

All these activities, moreover, are administered by a range of providers that rarely consult with each other to coordinate their efforts and that are, to a great extent, free to set whatever standards they like in planning and administering these activities. No jurisdiction that I’m aware of sets and enforces a comprehensive strategy and structure for new lawyer training. The bar has effectively outsourced Initial Professional Development to a series of for-profit providers without specifying the equivalent of an acceptable and enforceable Service Level Agreement to govern it.

We frequently complain that “law school doesn’t prepare students for practice.” But we’re missing the point. The point is that our sloppy, jury-rigged approach to new lawyer training is broken. It’s a glaring failure of self-regulation, and it’s what Initial Professional Development reform needs to address.

Consider three emerging alternatives to the status quo, and you can start to see the forces that will guide this reform process.

1. The training brokerage. In the UK, a contract lawyer agency called Acculaw has set off a minor earthquake with its entry into the solicitor training sphere (new solicitors are required to spend two years as “trainees” and pass a professional qualification course before recognition as full-fledged lawyers). Before now, firms would recruit and hire the trainees themselves, much as Canadian firms recruit articling students and American firms hire first-year lawyers. The difference is that UK firms are making commitments well over two years in advance of the day they’ll actually bring these trainees on board as solicitors, at which point the firm’s and the market’s circumstances may have changed dramatically.

Now, Acculaw will hire these trainees straight out of post-graduate law school and then “second” them to law firms as requested. The secondments (a maximum of three per trainee) will last between three and eight months. The premise is that the trainees will serve as a “just in time” resource for firms that want to hire potential new lawyers more sparingly and judiciously.

Acculaw says it will oversee the secondment and ensure that the trainees are, you know, trained. But how this will work in practice is anyone’s guess: we’ve never tried something like this before, so we don’t know how well, if it all, this will advance the goal of acceptably competent new lawyers. Most large and prestigious firms will continue to recruit straight from the schools and have their pick of the graduating litter, so Acculaw’s trainees probably will be viewed as the leftovers. Will this increase their attractiveness on the market? Probably not. But the UK is much farther ahead than other jurisdictions in sending work to LPOs and contract workers: trainee offers of all kinds have dropped nearly a quarter in the last two years. Many trainees will be happy to take whatever they can get.

Make no mistake: this is not a graduate-oriented initiative. Acculaw couldn’t be clearer that its customers are law firms and that its goal is to streamline the trainee recruitment process for efficiency and effectiveness. But this all came about because the previous system wasn’t serving the firms’ needs. That’s the lesson to draw from the early days of the Acculaw experiment: if law firms don’t like the lawyer training process, they will come up a risky and potentially problematic alternative. A centralized brokerage for Initial Professional Development, one where the company takes the trainees in hand and accepts ultimate responsibility for their competence, could work very well in theory, and I hope that’s where this goes. But it’s not hard to envision a less happy outcome.

2. The teaching law firm. Law professors Brad Borden and Robert J. Rhee attracted a lot of attention earlier this month with the suggestion that law schools own and operate their own law firms. In Prof. Rhee’s words, “graduating students [would] get trained in the practice of law for a fixed duration, similar to a judicial clerkship or analogously a residency for new doctors. The law firm would be run by senior attorneys who develop books of business, and it would be economically sustainable.Response from the legal community was widespread — that last link contains an excellent analysis by John Hodnicki — and mixed interest with skepticism. My own reaction was that I’d be more interested to see law firms get into the legal education business. But there is definitely something here.

What the professors are suggesting is essentially the legal equivalent of a teaching hospital. (Surely you’ve watched House?) A teaching hospital, like all hospitals, is primarily concerned with treating the sick and injured; but a strong secondary purpose is to give med school graduates and interns an opportunity to experience and learn from actual medical practice on real patients, something that no amount of instruction or simulation can achieve. Senior physicians and staff supervise their work, of course, but the patient experience is undeniably different than it would be in a standard hospital. The expectations are also different, on both sides of the bed: patients of teaching hospitals are frequently low-income or uninsured. Teaching hospitals work by filling a number of gaps in the markets for both medical services and medical training.

In theory (and at Chicago-Kent Law School, in practice), a “teaching law firm” could work equally well: senior law school students and recent graduates, under the supervision of experienced lawyers, engage with clients, research issues, try to resolve problems and generally learn the ropes of being a lawyer while getting the hang of billing and collecting for legal services. Given the likely clientele, the legal work would likely focus on criminal cases, custody and support disputes, immigration and refugee matters, landlord and tenant conflicts, and so forth. That sounds like a law school legal clinic, but those operations are underfunded and are not, so far as I know, operated like businesses. To succeed, a teaching law firm would have to train lawyers not just to practise law but also to run a profitable business. The profits would probably be minuscule, but the point is that the graduates would learn that a law office is not a charity.

It’s worth wondering, however, whether law schools are the best institutions to operate these teaching law firms. Mitchell Rubinstein points out an important acknowledgment by the professors themselves: “this law school law firm would have to be staffed by attorneys, not by the professors. The major problem with law school professors today is that many, if not most of them, are simply incapable of practicing law and many never had. But this is what we have, for the most part, training the lawyers of the future.” If a law school opens a law firm and has to bring in outside lawyers to run it, we have to ask why the law school is involved at all. Teaching hospitals are often associated with universities, but universities and med schools have a better reputation within the medical profession than law schools enjoy in theirs. And there are very few med school professors who’ve never treated a live patient. This may be a good idea in search of the right home.

3. The expert application. A third possible route for ensuring the competence of new lawyers is a technological one: the use of expert applications. Earlier this month, I received a demonstration of a fascinating new application by a company called Neota Logic, founded by respected knowledge management pioneer Michael Mills. Neota Logic is essentially an applied knowledge management system: it automates lawyers’ knowledge and expertise to create step-by-step processes for solving low- and medium-grade regulatory, compliance and advisory problems. Michael sometimes refers to it as “Microsoft Excel for compliance.”

Neota Logic users log in and enter the relevant data on the regulatory or compliance issue facing them; the system prompts them to answer a sequence of questions based on the data it’s receiving. The system guides the user through the process of entering the data, choosing the paths dictated by the responses, and arrives at the same result that an expert lawyer would have reached. It’s not only a cost-saving system that reduces the need for lawyers — it’s also a quality-control system, through the creation and application of a legal database that’s informed by, and collectively better informed than, all the lawyers whose expertise underpins it.

Neota and other expert applications to come will have a massive impact on legal workflow generally, and I’ll look at that in more detail later this fall. But what really struck me was that in the firms where it’s bring used, Neota has emerged as an associate training tool. The lawyers who’ve used it refer to it as the “partner at your shoulder” system, or more colourfully, the “Guardian Angel.” It performs essentially the same function as having a partner sitting in a chair next to the associate, asking her all the right questions, checking on her responses, and guiding her towards the right conclusion. This type of mentoring is something we wish every law firm partner would devote the time and energy to provide; we also know that extremely few ever do. So an expert system that trains lawyers as they perform could be a fine alternative.

It’s worth noting that none of these three innovations — training brokerages, teaching law firms, and expert applications — has come from the practicing bar or professional regulators. That’s not really surprising, considering lawyers’ track record when it comes to developing innovations; but I do think we’re pretty decent at adopting innovations once they’re available. Olswang has already signed on to the Acculaw system, some law firms are already using Neota, and lawyers of all kinds found the “law school law firm” to be worth a close look. I’d like to see bar associations and lawyer regulators consider these and other emerging options for Initial Professional Development as possible external solutions to the new lawyer training fiasco we’ve foisted on ourselves thus far.

If we’ve learned anything from our current situation, it’s that Initial Professional Development has to be taken seriously as the first and fundamental competence responsibility that comes with self-regulatory status. This will probably sound very familiar to you, but: just because we’ve always ushered lawyers into the profession this way doesn’t mean it’s good enough, or that we should keep on doing it this way. Multiple players have something to contribute to new lawyer training, including law schools, law firms and private-sector providers; but at the end of the day, the organized bar has to pull it all together, decide on a new approach, and enforce it. And “the end of the day” had better arrive very soon.

At the crossroads of regulation

I respectfully suggest that we stop using the following lines from Henry VI Part 2, Act 4, Scene 2 in conversations about the modern legal profession:

DICK: The first thing we do, let’s kill all the lawyers.

CADE: Nay, that I mean to do. Is not this a lamentable thing, that of the skin of an innocent lamb should be made parchment? That parchment, being scribbled o’er, should undo a man? Some say the bee stings: but I say, ’tis the bee’s wax; for I did but seal once to a thing, and I was never mine own man.

These lines are routinely misused by two warring parties: the small-minded critics with contempt for the profession who gleefully cite Dick’s line to justify actionable loathing of an identifiable group, and the self-righteous lawyers who aver that Dick and Cade were traitors and rhapsodize about lawyers’ role as bulwarks against anarchy (in actual fact, lawyers in Henry VI’s time were often viewed as corrupt accomplices to the king’s crippling taxation laws).

I wish we could leave these lines to literature and history, but that phrase keeps coming up, most recently in a new book from the Brookings Institution titled First Thing We Do, Let’s Deregulate All the Lawyers. The title put me off right away, as did the unusually flawed article in The Economist that discussed the book’s findings and recommendations.

The authors are, however, on reasonably solid ground when they identify numerous distortions in the legal marketplace that inflate costs well beyond what they should otherwise be. I’d need to read the book to assess their claim that “of the $170 billion spent on lawyers every year in America, some $64 billion is a premium produced by market distortions,” but it doesn’t sound wildly improbable to me. (Gillian Hadfield’s excellent work on the distorting effect of lawyer regulation comes highly recommended.)

What I really don’t get, however, is this idea that “deregulation” of the legal services marketplace would be a good thing. Set aside for a moment the sorry history of deregulation across almost every industry, as well as the fact that we’re now unmistakably entering an era of more regulation and greater government involvement in the private sector. Legal services in particular require regulation for the simple reason that consumers are in no position to know whether or not they were properly served: this is not a marketplace in which buyers can figure it out for themselves before purchasing. Legal market deregulation isn’t an option even in the UK, which is undergoing massive change, as Stephen Mayson points out.

What we need in the legal marketplace is not deregulation, but disinterested regulation. We need a regulatory structure in which we can have the highest possible confidence that all vendors are equally scrutinized and all purchasers are equally protected.

In many jurisdictions, legal services are regulated by lawyers, who regulate themselves and other licensed providers in the public interest and prosecute unlicensed providers for unauthorized practice. It was, however, the widespread perception of inadequate self-regulation that led to momentous governance changes in Australia and England & Wales, highlighted by the removal in whole or in part of lawyers’ right to exercise ultimate authority over either the marketplace or themselves — demonstrating with a vengeance how fragile these rights actually were.

The public interest in disinterested regulation is now going to take center stage in the US and Canada, thanks to the emergence of web-based legal service providers (including, significantly, Lexis-Nexis) not owned by lawyers and not licensed by the appropriate governing bodies. The correct function of legal marketplace regulation, it seems to me, is to set acceptable service and competence standards for all providers and assess the fitness of each provider against those standards. Lawyers’ traditional approach to regulation, by contrast, has been simple and syllogistic: (1) Only lawyers are competent to provide legal services, (2) these providers are not lawyers, (3) ergo, these providers are not competent to provide legal services.

And maybe so. But jurisdictions in which the government regulates the legal market (such as the UK, where the Legal Services Act specifically prioritizes consumer interests) have viewed these new outside providers more favourably than jurisdictions (such as the US) in which lawyers regulate the market. It’s reasonable to ask why that’s the case, and it’s not difficult to come up with answers.

The “practice of law” (as I noted at the 3 Geeks blog recently) is something of an historical anomaly: lawyers have long been performing many law-related activities without competition mostly because there wasn’t anyone else around to compete. Our exclusivity emerged from the fact we were the only competent entrants in the market, not from a time-tested demonstration of skill so superior to other players that it required a ring-fenced franchise on legal services. It’s natural, in that context, that “self-regulation” should have morphed into “marketplace regulation,” but that doesn’t mean that morphing had a rational basis.

Times have now changed and new providers have emerged, making defensible claims that they can tackle some (but by no means all) kinds of work that lawyers previously performed exclusively. How will we respond, and with what regulatory philosophy?

“Disinterested regulation” of the legal marketplace is not only in consumers’ interests; it is very much in our own interest as lawyers. If the public and the government perceive us as truly objective regulators, fair dealers who apply the same standards of competence and reliability to lawyers and non-lawyers alike, then we have a pretty good shot at retaining our governance role. But if we’re instead perceived as regulators who consistently approve our own kind while systematically barring everyone else, then we’re practically asking for state intervention. You can guess which end of the spectrum we’re currently nearer.

No one out there is going to cut us any slack; too many people still quote Henry VI and smirk. So we need to be beyond reproach when assessing new market entrants in our regulatory role, or we risk serious consequences. We can afford to lose the right to govern the market; I would not want to see us lose the right to govern ourselves.

Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.

The future of lawyer associations

Thomas Wolfe says you can’t go home again; nevertheless, I’m returning to my alma mater Queen’s Law School tomorrow to give a presentation on the future of the legal marketplace. While preparing slides for my section on networking, I noticed that examples of old-line bar associations (the volunteer kind, not mandatory or regulatory bodies like law societies or state bars) were becoming outnumbered by examples of new networks, everything from Facebook, Twitter and Quora to LinkedIn, Legal OnRamp and Solo Practice University. And that got me thinking about the future of lawyer associations.

This is a topic, I must tell you, into which I tread with caution. After all, I spent ten years drawing a paycheque from a bar association, and I continue to speak to and advise legal associations among my current consulting engagements. But I think it’s time to take a hard look at what lawyer associations, some of which trace their origins back to the 19th century, are and aren’t capable of selling to a 21st-century marketplace.

Lawyer associations of all kinds coalesced around a basic truth: there’s strength in numbers. Joining a group of professionals with similar practices, interests and affinities provides a practitioner with the comforts of collegiality, the advantages of an amplified voice, and the possibility of personal gain (referrals, learnings, and so forth).

But maybe more importantly, lawyer associations provide the benefit that every kind of club bestows: self-affirmation. Almost every member of a lawyer organization is proud to be a lawyer and enjoys the elite and rarefied atmosphere of other lawyers who feel the same. Lawyer associations, in this sense, are aspirational: membership is often an endorsement less of the specific association’s virtues or policies or activities, than of the idea that lawyers are special and have special roles in (and responsibilities to) society. Lawyers like that notion, and they like the company of others who share it. That fact has to underlie a lawyer association’s purpose and functions.

Unfortunately, I think a lot of lawyer associations have lost sight of that. Most lawyer groups these days are preoccupied (reasonably enough) with value: are we providing sufficient return on lawyers’ investment of membership fees and volunteer time? It’s the right idea, but I think many associations take it in the wrong direction, by focusing too much on tangible rather than intangible benefits.

Lawyer associations spend a lot of money providing business-improvement resources (checklists, practice pointers, forms and templates), publishing practice management materials (newsletters, magazines, handbooks, etc.), carrying out CLEs (both the in-person and online variety) and obtaining member discounts. These activities are sensible, legitimate and valuable — I’m a former association magazine editor, after all. But the thing is, many other people are offering them too. There’s not much unique about a CLE or a handbook or a discount provided by a lawyer association — it’s rarely a positive differentiator from the rest of the market. Lawyer associations that over-emphasize these services have to answer the question: what do you provide that I can’t also get from the market at large, on an à la carte basis, for less than my annual membership fee?

Many lawyer associations recognize this risk and undertake less tangible activities too, chief among them advocacy on lawyers’ behalf (or, put less delicately, lobbying governments as a special interest). Certainly, no one else will advance lawyers’ claims, given the perception that such interests are not always, shall we say, fully aligned with the greatest public good. But lawyers have as legitimate a claim to advocacy as any other constituency, and lawyer associations can and should uniquely fulfill this role. The problem, though, is that lobbying is not exactly what you call aspirational: necessary as it may be, it’s not a parlour game and it can be an unpleasant experience for all concerned. A lot of lawyers hope for something more from their association than simply aggressive self-interest.

Maybe the answer is public-interest advocacy? Many lawyers are motivated by the belief that laws should be fair and justice should be accessible, so a lawyer organization that publicly urges progress on these fronts will attract aspirational lawyers without repelling the average citizen. That makes a lot of sense and again, is a worthy undertaking for a lawyer association. But there are problems here as well. Public-interest advocacy is a difficult and thankless task that produces relatively few wins against a series of draws or losses; “social justice” issues adopted by an association can be internally divisive and even incendiary; and most pointedly, lawyers do tend to ask, after a while, what benefit they personally get from their association fighting the good fight.

Again — all of these activities have merit, to one degree or another, and lawyer associations legitimately can pursue any of them. The challenge is that, especially in a recessionary period and in the face of unprecedented private-sector competition, they can’t pursue all of them. Associations have to choose strategically — and more importantly, they have to decide what their foundation is. What’s that one thing, that single unique and effective purpose, that associations primarily serve and upon which they are built? It’s not annual meetings, which have dwindled in attendance and importance as physical distances have become less of an obstacle to networking. It’s not improving the image of lawyers, investing thousands of dollars in fruitless efforts to make lawyers more appreciated and valued by a public that is quite happy to stereotype and scapegoat us. So what’s left?

My own suggestion is this: lawyer associations should transform themselves into lawyers’ marketplace evangelists. They should adopt as their mission a sustained campaign to trumpet the unique advantages of choosing lawyers over the many other options spreading throughout the legal services market. Our de facto monopoly on legal services is already disappearing, and our regulatory advantages likely will follow shortly. Lawyers need to differentiate themselves from the people, processes and programs that are coming into the marketplace and drawing clients away; but no lawyer or firm is going to launch an expensive and complex campaign that will benefit competitors as well as colleagues. Lawyer associations can. And they can do so by emphasizing lawyers’ training, professionalism, ethical standards and other outstanding characteristics with which lawyers are proud to be associated.

That’s what associations can do externally. Internally, I think they need to focus on collegiality and collaboration. As society becomes more virtual, face time becomes far more valuable. But lawyer gatherings of all kinds still over-emphasize the role of educational sessions and business meetings — events that lawyers can attend from their desks or on their smartphones — while relegating socializing and networking opportunities to short coffee breaks or abridged cocktail parties at the end of the day. Associations should reverse this: host gatherings to network and socialize first, and to learn or conduct business formally as a sidebar. Look for ways to encourage face time and personal interaction among lawyers — hold un-conferences, sponsor speed-roundtables, form micro-panel discussions for small, specialized groups, and so forth.

Law firms are difficult organizations in which to effect change, and law schools even more so. But the challenge of transforming lawyer associations might be the greatest of all, because institutional memory and habits are powerful and deeply ingrained and decision-making ability is often widely diffused. But the need is real, the challenges are building, and the clock is ticking. One way or another, voluntarily or otherwise, change is coming to the lawyer association sector, too.

Jordan Furlong speaks to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.

Will-writing and the redefinition of “legal services”

Last month, a BBC investigative program called Panorama exposed a wide range of illegal and unethical practices by “will-writers,” advisors who help people prepare wills and who are not lawyers. One result of that broadcast could be a significant clawback of lawyer regulatory power over the legal services marketplace in the UK, with implications for the future of this marketplace globally.

Here are some detailed accounts of the Panorama broadcast and of the resulting controversy. Briefly: the program uncovered several instances of will-writers who exploited their clients through massive overcharging, shoddy workmanship, and even outright fraud. The abusive will-writers were neither lawyers nor (evidently) members in good standing of one of the professional will-writing associations that have evolved with the 2007 passage of the Legal Services Act. That statute divides legal services into “reserved legal activities,” which are exclusive to lawyers, and “legal activities,” which are not exclusive to lawyers and are not otherwise subject to specific regulation. Will-writing is not included in the former category and, therefore, is considered an unregulated activity.

In the wake of the broadcast and the public recriminations that accompanied it, the relevant authorities are now under pressure to take swift action. The Legal Services Board, the overarching regulator of all legal professionals in England & Wales, has promised to fast-track a debate and decision regarding whether will-writing should be added to the list of “reserved legal activities” and given exclusively to lawyers. (The Law Society of Scotland is already pushing such measures forward.) An interview with two officials from the Law Society of England & Wales sums up lawyers’ concerns with the current situation (which will be familiar to all advocates of lawyers’ role in legal services provision):

It is the presence of untrained and unregulated people working in the area that has led to a range of problems that can adversely affect consumers, Clarke and Roberts insist. “A lot of clients don’t understand making a will can be a complex process. They think it should be simple, but often it’s much more involved due to the presence of step-children, property and other assets in other countries and lots of other issues which are a part of modern life,” Roberts notes.

Unregulated will writers who lack legal training often fail to understand the legal complexities themselves. “One I know was going to make a will for a large estate which would have been involved, so he merely suggested everything be left to a trustee who could sort it all out as he saw fit. All solicitors are not infallible, but experienced solicitors will understand how to deal with complex estates and take account of all the eventualities so the testator’s wishes will be realised and the estate can be properly managed,” says Roberts.

You can see where all this is likely to lead: to the designation of will-writing as a reserved legal activity under the Legal Services Act. In one respect, it’s difficult to argue against this turn of events. The abuse of unsophisticated consumers, many of them elderly or impoverished, is repugnant and needs to be stopped in its tracks. Solicitors, as noted, aren’t perfect, but they come with a guarantee of education and training and they are backed by insurance funds that can reimburse clients who’ve been poorly served. Wills and estates, in many cases, are not cut-and-dried matters and they can require sophisticated advice, especially at a time of generational change when demand for estate law help will only rise.

Given all that, making will-writing a reserved legal activity seems like a no-brainer. And yet, there are good reasons for the Legal Services Board to proceed with caution here.

To begin with, it’s not entirely accurate to call will-writing an “unregulated activity.” Consumer protection laws are in force precisely to protect the buyers of commercial services that fall outside specific regulatory schemes; moreover, the last time I checked, fraud is still on the books in Britain as a criminal offence. Provisions already exist in Acts and regulations to protect people from the incompetent and unscrupulous and to prosecute such predators where necessary.

Secondly, the current absence of a specific regulatory system for will-writing doesn’t mean that the only alternatives are full lawyer control or unfettered market freedom. The Institute of Professional Willwriters, one of the recognized will-writing groups, will happily remind you that it is the only organization of its type whose Code of Practice has been approved by the Office of Fair Trading. Self-regulation by the will-writing industry down the road is not out of the question, nor is the creation of a specific will-writing regulatory scheme that doesn’t restrict this area of practice to lawyers.

Thirdly, access to justice issues arise whenever a decision is made to restrict an activity to the legal profession. Part of the reason for the huge upsurge in will-writing services in the UK is that less than half of Britons have a will; considering that lawyers have had every chance to exploit this latent market and have failed to do so, it’s hard to make the case that they should now have exclusive rights to this practice area (especially since lawyer regulation tends to drive up costs). The legal profession and the government jointly own responsibility for a failure to educate the public in this area, with the result that, for example, 67% of consumers wrongly believe all will-writers are solicitors.

Fourthly and most importantly, the whole question of what should constitute a “reserved legal activity” hasn’t received nearly enough scrutiny. That’s the conclusion of a just-released report sponsored by the Legal Services Board and written by Stephen Mayson, the widely respected director of the Legal Services Policy Institute. In his report,

Mayson said he had found the origins of the six activities currently reserved to be “remarkably obscure,” with “little basis for suggesting a common policy rationale that justifies their existence”. For example, he discovered that the conveyancing monopoly came about in 1804 when Prime Minister Pitt the Younger wanted to appease a profession unhappy with his plans to increase taxes on articles of clerkship and practising fees. Professor Mayson said it would be “unwise to consider any particular legal activity for inclusion or exclusion in the absence of a broader set of criteria that could be generally applied.”

So there are good reasons for England & Wales to think twice before reflexively placing the writing of wills under the exclusive authority of the legal profession. But if you’re a North American lawyer who practises something other than wills and estates, and you’ve made it this far into this post, you’re probably wondering what possible relevance this has to you. I’d argue it has great relevance, because this looks like the first major skirmish in what will be a decade-long war over a crucial question: what should be classified as “lawyer services” and what can be classified merely as “legal services”?

We’ve tended to use “legal services” and “lawyer services” more or less interchangeably over the years, such that “legal services” has become a virtual synonym for “the practice of law” (lawyers have not hesitated to encourage this blurring of lines). But the will-writing controversy forces us to think about law-related services that, for reasons of both marketplace efficiency and access to justice, could and perhaps should be kept outside the strict ambit of the legal profession. Granted that a Wild-West free-for-all wills market serves no one’s interests: is the opposite end of the spectrum, wills kept under lawyers’ lock and key, the best alternative? Isn’t the middle ground worth at least some exploration and settlement?

Consider another example, a growing force coming from the opposite direction: legal process outsourcing. Three recent articles explore the impact of LPOs on the traditional big-firm business model, and I recommend a thorough reading of all three:

If I can try to summarize the thrust of three lengthy and insightful pieces, it seems to be that:

  • LPOs and other non-traditional legal service providers are taking a growing amount of once-profitable associate-level work from law firms,
  • the unbundling model upon which these new providers are based is changing client expectations about where and how certain types of legal services are purchased, and
  • the result will be law firms with work of less quantity but higher quality, which will inter alia benefit the quality of a legal career generally.

LPOs, essentially, are forcing law firms (and their clients) to ask the critical question of our times: is a lawyer really the best choice to do X? The answer in many cases is yes, especially when the job calls for the kind of judgment, nuance, skill and wisdom that lawyers bring to the best of their work. These are “lawyer services.”

But in many other cases, the answer is no: all or parts of tasks such as document review, due diligence, electronic discovery, document drafting and production, small-claims court representation, and basic transactions like house purchases, straightforward divorces, and as the current situation in England & Wales suggests, wills and estates, don’t always need a lawyer’s attention. Should the providers of these services, whomever they are, be qualified and trustworthy? Of course. Must they always be lawyers? I think the answer is: of course not.

As time goes on, “legal services” will come to mean “commercial services related to the exercise of law-related rights and the fulfillment of law-related responsibilities,” without the necessary inclusion of lawyers. “Lawyer services” will be a sub-category defined as “legal services that, for reasons of required skill and/or public protection, are provided exclusively by lawyers.” “Legal services” will be offered by a wide variety of domestic and foreign providers, none of whom need to be lawyers; their regulation will be specific to the competence required, and access to these services will be available more widely than when lawyers offered them more or less exclusively. “Lawyer services” will be the cream of what we now consider to be the very deep crop of lawyer activities, only the most challenging and the most valuable to clients.

There’s nothing novel about this kind of distinction in professional services.

  • Richard Susskind quotes the statistic that 4% of health-care services are provided by doctors, while 50% of legal services are provided by lawyers. We accept a distinction between “health” services (delivered by nurses, physiotherapists, massage therapists, psychiatrists, and many other “health practitioners”) and “medical” services (delivered by medical doctors — the word “medical” itself is derived from the Latin for “physician”).
  • When we go to have our teeth checked, we usually spend most of our time with a “dental assistant” and only the last few minutes with the “dentist.”
  • We use “architects” and “engineers” to design our homes and buildings, but we hire “contractors” and “tradespeople” to implement designs and renovations through actual construction — the heavy lifting, literally.

We accept all these situations as normal because the markets for these professional services have evolved to allow the most skilled professionals to do the highest-end, highest-value work and an army of other professionals, para-professionals and skilled craftspeople (usually under specific regulatory or quasi-regulatory regimes) to carry out the rest of the work. Doing it any other way — requiring medical doctors to give flu shots, obliging dentists to deliver teeth-cleaning, requiring engineers to lay bricks — would result in massive system backlogs, huge price increases, and widespread dissatisfaction by both the professional and the client — in other words, pretty much the situation we have now in the legal marketplace.

The legal marketplace, whether some lawyers like it or not, is heading towards the same kind of stratification as other professional fields, to a massive “sorting out” of what lawyers need to do and what they don’t need to do. It’s immaterial whether this is brought about by regulation or the marketplace; in the end, these two forces will be working in virtual lockstep to effect change. There will be a period of disruption, maybe even chaos, as we figure out how certain legal services are best delivered by non-lawyers; it won’t be a tidy process, and there will be damage of the kind suffered by will consumers in the UK (and associates in large law firms). But every marketplace has had to go through this, and if doctors could see their way clear to allow non-doctors to take on the sacred duty of preserving life and promoting health, I think lawyers can bring themselves to make a similar commitment.

This is what the next decade will bring: a Great Sorting Out of demand for legal services, as the market reviews its choices and decides where and from whom it wants to acquire what it needs. As time goes by, the category of “legal services” will grow by volume, while “lawyer services” will shrink by volume; but both categories, paradoxically, will grow in quality. Lawyers in particular will benefit from a task list that requires more sophistication and higher-level skills. For that reason alone, but also because of the ultimate interests of clients, we should be working to narrow our focus on the highest-level work while simultaneously supporting the development of practices and regimes to oversee the more basic work we used to do. It’s anyone’s guess whether our profession will step up to that challenge.

Resolving the legal education disconnect

In conversation last week with a law school professor, the subject of law firms’ tunnel vision when recruiting law graduates came up. Firms focus relentlessly on the students with the highest grades, the professor lamented, even though these students can be one-dimensional performers with an affinity for the academic environment and no competing pressures outside the classroom. Contrast that with an older student, perhaps with a couple of kids and a part-time job, with or without a partner at home, who took an unorthodox route to law school and perhaps struggles to compete with the younger students — but who is still bright, hard-working, experienced and capable of being a standout lawyer. The firms never even look at graduates like that, and an opportunity is missed on both sides.

At first blush, I agreed with this. I’ve complained myself about the relatively unsophisticated approaches to recruitment that many law firms still take. The students most in demand are the top academic performers from the “top” schools, even though there’s nothing beyond the Cravath Theory to prove that students with high law school marks will make the best lawyers. Does a fleet of “A”s guarantee good lateral thinking, business acumen, client awareness or collaborative work habits? Of course not. Yet firms continue to flock to the academic stars while overlooking graduates who despite (or even because of) their unusual backgrounds would make superb lawyers whom clients cherish. Typical narrow-minded law firms.

Then I was struck by this thought: “Hang on. Who’s giving out these marks in the first place?” I turned back to the prof to ask whether the schools don’t bear responsibility of their own. If the older mother of two with a part-time job is more deserving of employment consideration than the 20-something with his nose in the books all year, why is she at the bottom of the graduating class while he’s at the top? Why doesn’t she get the A, if in fact she’s the stronger candidate to succeed?

But even as I asked the question, I already knew the answer. Law schools don’t assess students in terms of their likely success at the bar. They assess them the same way schools everywhere assess all their students — by the satisfactory achievement of knowledge standards, usually expressed in written form in short-term exams and long-term papers. In the same way that IQ tests measure only the taker’s ability to score well on such tests, so too do good marks in law school only measure one’s ability to complete law school courses to the school’s satisfaction. It has nothing to do with whether you’ll be a good lawyer someday. This is not a secret and it’s not a novel discovery. But the idea that law school achievement augurs professional success remains the fundamental assumption underlying law school, and the bar has accepted it for decades. It’s time for that to change.

The problem with using a law degree as the de facto qualification to seek admission to the bar, and the disconnect between the priorities of academia and the practicing bar, have never been so clear. A good example is a report recently released by a task force of the Federation of Law Societies of Canada on the common-law degree. It is not, by most measures, a radical document. It recommends that law societies in common-law jurisdictions adopt a uniform national requirement for entry to their bar admission programs, which has never existed and would certainly be nice to have. It does not recommend that law schools transform their curriculum, nor does it go nearly as far as the Best Practices Report, the Carnegie Report, or the ABA’s recent decision to focus on output measures when certifying law schools.

What the report does recommend is that every law school in Canada teach a stand-alone ethics and professional responsibility course, given the importance of these attributes to the practice of law. This has not gone over well with the law school community, to judge from comments in this Canadian Lawyer article from, among others, widely respected law professor Harry Arthurs:

[H]e finds it odd that the federation “took it upon themselves to lay down what law schools should be teaching and how they should use their resources and what their job is in general. Law societies, much less the federation, have no statutory power to tell law schools what to teach or to what end they should spend their scarce resources,” he says. … While Arthurs notes that the law society has the right to say who it will admit to practice, “they certainly can’t say to law schools, ‘You are going to teach legal ethics, you are going to teach certain skills competencies, and you are going to file a report annually which provides us with detailed information to demonstrate that you’re doing that.’”

Professor Arthurs is, of course, absolutely right. Law schools don’t report to law societies and are under no obligation to teach anything to their students simply because the law societies say so. His comments bring that fact into sharp relief — and should, I think, serve as the launching pad for the profession to rethink its traditional acceptance of the LL.B. or J.D. as the default qualification for entry into the profession. The first three years of its lawyers’ education and training are almost entirely out of the bar’s hands. That should strike the profession’s leaders as unacceptable and should galvanize them into doing something to correct it.

Let me be clear that this is not a call to impinge on law schools’ academic freedom or to take over the schools’ operation. I spent three years in law school, and running one is just about the last thing I’d want to do — they’re complex institutions whose management can be a challenging and thankless task. But they are not designed to be lawyer training facilities, and they are not practice-friendly. I still remember the law prof who told our class, “A students become professors, B students become judges, and C students become very rich lawyers.” I think he meant it to reassure us not to worry so much about grades. But it expressed perfectly the irrelevance of academic distinction to professional success, the self-perpetuating nature of law school achievement, and the remarkably arrogant belief that the highest form of legal accomplishment is the teaching of law.

The bar’s role is not to run law schools — lawyer-run institutions don’t tend to inspire confidence either. The bar’s role is to ensure that its members receive the best training available, in order to ensure the durability of professionalism and high-quality service to clients. I think that obliges the bar to look long and hard at the law degree and decide whether a three-year program over which the bar has no control is an appropriate prerequisite for practice. If the answer is yes, then the profession should quit complaining about what law school does and doesn’t do — lawyers don’t run law schools, and if they don’t care to create an alternative, they have nothing more to say on the subject. But if the answer is no, then the profession is obliged to come up with a prerequisite that it believes does provide appropriate preparation for admission to the bar, over which it does exercise an appropriate degree of control, and for which it bears complete responsibility (at considerable expense, I might add).

Should that come to pass, law schools will suddenly face competition in the lawyer training marketplace. And they’ll face a choice themselves: to maintain their current focus and perhaps risk a massive decline in enrollment and tuition, or to re-engineer themselves and compete directly with lawyer-operated training centers. That’s not a happy choice, and I don’t wish it on the schools gladly. But if and when the bar decides that it can no longer responsibly delegate the first three years of legal training to completely independent third parties, then that choice will arrive. This is a difficult but necessary process we can’t put off any longer.

The UK crucible

North American lawyers have been fretting lately about the effects of this recession and what it means for their future. But the recession is only an amplifier or accelerator of change, not its source, and it doesn’t tell us much about the shape of things to come. If you  really want to know what the future looks like, peer across the Atlantic at the revolution now firmly and irreversibly underway in the United Kingdom. But be prepared before you look — otherwise, you might feel like the valedictorian in Say Anything: “I’ve glimpsed our future. And all I can say is … go back.”

* Last month, the Legal Services Board (the new overall regulator of all UK legal services providers) issued a discussion paper asking for lawyers’ input on what Alternative Business Structures (ABSs) should look like. An ABS allows traditional legal services to be delivered through a vehicle other than the traditional partnership of lawyers — most famously by non-lawyer financing or ownership — and constitutes the keystone change to law firm structure envisioned by the Clementi Report and subsequent Legal Services Act. Responses to the paper are due within two months; ABSs themselves are scheduled to be unleashed in just two years. This excerpt from the paper’s executive summary should make the Board’s mandate and outlook very clear:

For centuries, legislation and professional regulatory rules have tightly restricted the management, ownership and financing of organisations that are permitted to offer legal services. Although the UK’s legal services sector is internationally competitive and highly regarded, these regulatory restrictions have stopped it from realising its full potential. Regulation has limited innovation and competition in the way that legal services are delivered. It has constrained consumer choice and restrained normal market pressures on law practices to deliver their services efficiently and effectively. Regulation has gone beyond what is rightly necessary to protect citizens from the unethical practices of a tiny minority to a framework which has restricted businesses and consumers alike. At the heart of the new regulatory environment for legal services is a process for scaling back these restrictions.

* Earlier this month, the Solicitors Regulation Authority (the lawyer governance body spun off from the Law Society earlier this decade) issued its own complementary consultation paper on ABSs. Here’s a summary posted by leading UK consultant Nick Jarrett-Kerr at Linkedin’s Legal Innovation Group:

“[T]he SRA lists 11 possible models for [ABSs] and asks for comment. They include the current [Legal Disciplinary Practice] model (mainly lawyers, but with some non-lawyer managers), two models of totally externally-owned law firm, the [Multi-Disciplinary Practice], the co-op model (externally owned, providing funeral services, etc., as well as legal), PE investment model, floated company, “hub & spoke” (where a non-licensed hub such as an administration company provides back- and middle-office services to law firms who make up the spoke), the Australian Integrated Legal Holdings model of consolidated ring-fenced firms, not-for-profit firms, and in-house teams.”

* Small-firm and sole-practice lawyers are not taking these developments lightly. The introduction of the ABS model “demonstrates utter contempt for the consumer of legal services,” QualitySolicitors.Com CEO Craig Holt told the BBC. “The solicitor profession faces being all but wiped out by a government seemingly intent on robbing the public of access to good quality, local legal advice.” Mr. Holt’s organization pressed its point at a protest last week outside a UK supermarket chain that, as the current saying goes, could soon be selling legal services along with tins of beans.

* Whatever the merits of their position, lawyers opposed to these changes have legitimate reasons to be anxious. More than 16,000 legal jobs disappeared from the UK in 2008 and 10,000 more are expected to go within the next two years. The prognosis for these unemployed practitioners is ugly: Lawyers who fall out of work have little hope of finding new jobs, with vacancies for associate solicitors down by 95 per cent this year, recruiters said. “It’s the worst year ever, by some margin,” Nick Root, founding partner of Taylor Root, a leading recruitment agency, said. “Those people who are being let go will not get another job.”

And there’s more. Linklaters’ managing partner Simon Davies: “[B]ecause of the changes brought about by the developments of the past year or so, much of that work will never come back – or at least not in the foreseeable future.” Stikeman Elliott’s London managing partner Derek Linfield: “This is like nothing any of us have seen, and no one has any idea how this is going to end up.”

* North Americans might not realize that the recession is hitting the UK and Europe harder than the US and Canada. But the changes to legal practice prompted by the downturn will last well into the recovery. Here are two to get used to. First, the UK government is instituting a reserve auction system for criminal legal aid work that will essentially award legal aid contracts to the lowest bidder in the name of “efficiency,” with predictable effects on the defence bar. Meanwhile, putting a major scare into big firms, gigantic Anglo-Australian mining company Rio Tinto has announced it’s outsourcing large chunks of its legal work to a dozen lawyers with CPA Global in Delhi. Rio aims to cut $100 million from its annual legal budget in the process and free up its internal lawyers for more complex work — and it expects its outside counsel to play along. (More on this in a separate post next week.)

Not everything coming to pass in the UK will migrate to the New World — but a lot of it will, and the changes that do occur are likely to stick. Expect some form of regulatory reform in the US and Canada within the coming decade, law firms forced by regulators or clients to redefine themselves and their business models, more lawyers losing full-time jobs and fewer full-time lawyers hired to replace them, lawyers figuring less and less prominently in the provision of publicly funded legal services, and nastier competition between remaining lawyers for fewer client dollars. Love it, like it, fear it or hate it, but don’t ignore it or pretend it couldn’t happen here — there’s not much here so unique to the UK that it can’t be exported worldwide.

The UK legal profession is entering a trial by fire, a crucible from which it should emerge smaller, leaner, more entrepreneurial by necessity and more captive to the demands of the client marketplace. Take a good look at that crucible, because it’s coming soon to a law practice near you.