Lawyer licensing and competence in Alberta

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Posted in: Governance, Law School, New Lawyers

I’m very pleased to let you know about Lawyer Licensing and Competence in Alberta: Analysis and Recommendations, a report written by me for the Law Society of Alberta. The law society’s Benchers (the elected lawyer directors of the province’s legal services regulator) accepted the report and all of its recommendations earlier this month. Preparations are now underway to implement the recommendations over the coming months and years.

For the inside story of how I came to write this report, and why it signals a new direction for my own writing and consulting career, please see this companion post. Here, however, I’d like to explain how the report itself came about, what its primary recommendations are, and why I believe it signals an opportunity for other jurisdictions to re-examine their own licensing and competence systems and bring them into the 21st century.

First, some background. Here are the essentials of how you become and remain a lawyer in Alberta:

  • Earn a degree from a Canadian law school or a certification from the National Accreditation Committee of the Federation of Law Societies of Canada.
  • Complete the bar admission program administered by the Canadian Center for Professional Legal Education (CPLED).
  • Complete a term of articling (one year of supervised practice apprenticeship with an Alberta lawyer in good standing).
  • Once called to the bar, annually assess your learning needs, choose a series of learning activities that will advance your proficiency in these areas, and report those activities to the law society.

This combination is unique in Canada: although three other provinces (Manitoba, Nova Scotia, and Saskatchewan) also engage CPLED to conduct their bar admission program, only Alberta does not use a “minimum number of CLE hours” system to ensure ongoing competence. (Indeed, Alberta stands alone in Canada and the US on that score.)

But back in February (which seems like a very long time ago), the law society decided to suspend lawyers’ CPD filing requirement while the system itself was reviewed and overhauled. That decision was triggered by uncertainty about whether the “self-assessment and learning activities” system was generating actual learning activity and whether the system had sufficient accountability to achieve that result.

But there were other issues at play. In 2019, the law societies of Alberta, Manitoba and Saskatchewan received the results from a survey of current and former articling students in those provinces. The news was bad: About one-third of all respondents reported discrimination, harassment, or ineffective learning environments or experiences during their articling term.

The law society had other concerns, too. It was worried about the degree of competence possessed by lawyers in their first few years of practice. It noted (as have other jurisdictions) dwindling levels of engagement in continuous learning by more senior lawyers. It recognized the dangers of an aging profession with insufficient retirement and transition plans. And it saw that BIPOC and internationally trained lawyers carried heavier burdens in all these areas.

I was engaged in April to write a report analyzing these issues and making recommendations to improve lawyer licensing and competence in Alberta. Although law school and legal education were outside my commissioning scope, I was otherwise encouraged to draw whatever conclusions seemed to me fit and justifiable. Five months, 25 interviews, 80 pages, and 30,000 words later — and with the absolutely irreplaceable support and assistance of law society staff — I handed in my draft report. Three months later (last week, to be precise), the law society accepted the final report and all of its recommendations.

To find out every last detail of this document, I’d obviously suggest you read the full report (or at least the executive summary at the start). But for present purposes, and in necessarily broad strokes, I’ll summarize my major recommendations and observations below.

1. Nobody has a greater impact on a new lawyer’s early career than the lawyer with principal supervising authority during their articling term. Supervising an aspiring lawyer is accordingly a privilege to be earned, not a right to be asserted. Any lawyer who wishes to act as an articling student’s principal should successfully complete an application process and training program to qualify for the role.

2. Articling suffers from several defects and inadequacies, but its biggest fault is that it is the sole method by which Alberta lawyers can gain their required supervised practice experience. The law society should develop new “pathways to practice” that provide consistency, defensibility, and accessibility, to supplement (and conceivably to soon replace) articling, such as a Law Practice Program, an integrated practice curriculum in law school, or a law society-sponsored “teaching law firm.”

3. There is no evidence that Alberta lawyers in their first three years of practice pose an outsized competence risk. But these lawyers, like early-stage lawyers everywhere, are credentialed and sent into the market before they are ready. The law society should provide a mandatory annual fleet of training, knowledge, and support programs in law practice management, business operations, client relationships, and other practical areas of critical importance for new practitioners in their first three years.

4. Articling students and new lawyers receive inadequate levels and types of supervision, particularly when it comes to their formative and restorative development (transitioning to practice, receiving mentorship, maintaining mental and emotional health). Every new lawyer should be automatically “opted in” to one of Alberta’s two outstanding lawyer mentoring programs (with the option to opt out for any reason).

5. Alberta’s self-assessment and learning outcomes CPD system is fundamentally sound and represents best practices in professional adult education worldwide; the province should not switch to an hours-based system. But the current system should be improved, by training lawyers in the art of skill self-assessment, focusing more on learning outcomes than activities, instituting random audit checkups to ensure lawyers’ compliance with their learning activity commitments, and periodically providing mandatory activities for all lawyers in areas of core competence less likely to be addressed individually.

6. Lawyers with more than 20 years at the bar present demonstrably lower levels of competence risk, and senior lawyers generally find most CPD activities lacking in relevance or utility. The law society should provide these lawyers with an optional CPD system that allows them to fulfill their learning requirements by engaging in a program of mentoring, new lawyer education and training, and public legal education and service.

7. Sole practitioners are the backbone of access to justice for individuals and families, especially in smaller communities; but they are unfairly under-resourced and overburdened with management duties compared to their colleagues in larger law firms. Lawyers who wish to start sole practice should be required to complete a training program to provide them with the knowledge, support, and resources to help them practise effectively and competitively. Given the risks to their clients of a sole practitioner’s incapacitation, these lawyers should also be required to create and file with the law society a business continuity plan.

I also made several observations throughout the report (or during my preparation of it) that were not submitted as actual recommendations, but that I felt warranted attention:

  • The airtight separation of legal knowledge and legal practice in law school is fundamentally wrong and needs to be addressed at the earliest feasible opportunity, through a collaborative process involving multiple justice system stakeholders.
  • Lawyers who are Black, Indigenous, persons of colour, or internationally trained suffer systemic discrimination and unfair treatment throughout their careers but especially at the outset. This needs to be addressed and corrected.
  • CPLED’s bar admission program, which focuses on lawyer skills and experience and does not include anything like a “bar exam,” is a best practices model for lawyer licensing that every other jurisdiction should study and emulate.
  • “Graduated licensing” is an impractical solution to a different and fundamental problem: Lawyers enter practice three to five years before they are truly ready to serve clients effectively. We must reform lawyer formation altogether.
  • “Minimum hours of CLE” is an antiquated input-based learning measure that provides no assurance lawyers have learned anything that will help them serve clients or practise law more effectively. CPD programs should abandon it.

There are several other aspects of lawyer licensing and competence assurance that are worth further exploration, but the law society did not engage me to write a scholarly treatise on the subject. My report aimed to be as practical and implementable as could be managed, given the realities of limited budgets, lawyers’ deep aversion to change, and the small matter of the pandemic. Most of all, I wanted to give the people at the law society a realistic blueprint for making incremental but important improvements to the province’s lawyer licensing and competence systems.

That last point gives me an opportunity to acknowledge with gratitude everyone at the Law Society of Alberta who was instrumental in bringing this report to fruition. Among the lawyers, I want to single out Ken Warren Q.C.  and Stacy Petriuk Q.C., Chair and Vice-Chair of the Lawyer Competence Committee, as well as all their colleagues on that committee; among staff, there are too many people to thank individually, but I want to highlight CEO and Executive Director Elizabeth Osler Q.C. and, in particular, Deputy Executive Director Cori Ghitter, without whom (as I said in the report’s closing lines) the report could not have been written.

I’d welcome any feedback that you might have about this report or the points raised in this post. And if you’d like to read my less diplomatically phrased observations about the state of lawyer development, licensing, and ongoing competence today, I invite you to read about my new career focus and the back story to this report, right here.

The power in your hands

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Posted in: Access, Governance

The most dangerous threat to public health and the global economy in nearly one hundred years — and make no mistake, that’s what the COVID-19 pandemic is — obviously deserves and receives our highest-priority attention. But the existence of a truly dire emergency doesn’t render our other crises and problems any less serious, and it doesn’t excuse us from the ongoing task of trying to resolve them.

It’s a dismaying turn of events that the pandemic has coincided with and overshadowed a critical moment in the legal regulatory reform world. On March 12, the Trustees of the California State Bar postponed a scheduled vote on whether to explore even the possibility of a “regulatory sandbox,” a mechanism that would allow supervised oversight of innovative legal services provision outside the traditional legal profession. The reasons given for postponing the vote included ominous terms like “political headwinds” and the need to “consult with all stakeholders.”

Andrew Arruda, a member of the task force that recommended the sandbox experiment in California, provides more details in this post, which also asks supporters of legal regulatory reform to write the State Bar Trustees and exhort them to vote in favour of the mere exploration of a sandbox experiment in California.

The stakes are extremely high: Although Utah has approved a sandbox and Arizona seems poised to introduce similar reforms, California is a bellwether state when it comes to American legal and regulatory trends. If California rejects even the possibility of considering a sandbox, that would constitute a severe setback to regulatory reform worldwide. If California forges ahead, momentum in favour of reform would increase tenfold everywhere.

Like you, I’ve been focusing my personal and professional attention on the pandemic. I wrote about the impact of COVID-19 on our justice system earlier this week, and I’ll write more on that topic here at Law21 next week. But while the pandemic unfolds, a critical turning point in legal regulatory reform has arrived and must be dealt with. I invite you to read the letter to the Trustees that I sent this morning, and if you agree with it, to send your own message of support based on one of the templates provided here.

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Dear Trustees of the California State Bar,

My name is Jordan Furlong, and I am a lawyer, author, and legal market analyst who tracks the rapidly changing global landscape of legal services. I’m writing you today to respectfully but urgently advocate that, when the recommendations of the Task Force on Access Through Innovation of Legal Services (ATILS) return for your consideration later this year, you cast a vote in favor of exploring a “Regulatory Sandbox” to consider and review innovative legal service provision.

Seeking Solutions

I’m absolutely certain that you understand the scope of the access-to-justice crisis afflicting California residents today, and I’m equally certain that you want to see a solution to that crisis as much as anyone else. The question, as it always is in such situations, is how best to procure that solution, balancing the benefits that can be achieved against the harms that could be suffered.

My suggested approach to answering this question is to think not so much in terms of “a solution,” but of “solutions.” There is no rule that says wickedly complex and intractable problems must be resolved by the application of a single type of remedy. Indeed, our experience dictates the opposite conclusion: that the more complicated and multi-faceted the challenge we face, the more nuanced and multi-dimensional must be the array of tools and approaches we bring to bear.

In this reasoning, there is a strong parallel to be drawn to our current health crisis, the novel coronavirus pandemic. Every type of authority — government, medical, scientific — is working hard to help people avoid or delay the spread of COVID-19. We are all (or most of us, anyway) working hard to “flatten the curve.” But we are taking multiple approaches, rather than a single approach, to help resolve the problem. 

  • We are not just avoiding large public gatherings of people, we are also staying home (except to get groceries and other necessities).
  • We are not just staying home, but we are also closing schools to prevent children from unknowingly spreading infections to each other.
  • We are not just closing schools, but we are also testing as many individuals as we can and working desperately to expand our testing capacity.

Any one of these tactics would go some distance towards slowing the spread of COVID-19 and decreasing the rate of infection. But if we only engaged in a single tactic, we would quickly find it to be terribly insufficient — we would lose the battle in short order. We need multiple tactics employed simultaneously to have any reasonable hope of getting through this pandemic.

(By coincidence, just before I finished drafting this letter on March 19, Governor Newsom issued his statewide order directing Californians to stay at home and avoid all unnecessary social contact.)

The Limits of “Lawyers-Only”

The access-to-justice crisis, while important, is of course not at the same level of seriousness as the COVID-19 pandemic. But the same reasoning, I submit, applies as well to the access crisis as it does to our public health emergency. 

Up until this point in history, we have deployed a single tactic to provide legal services: trained and licensed lawyers. We have not developed any other type or channel of service provision — indeed, we have outlawed such alternatives. To extend the analogy, it is as if we tested people for the coronavirus, but we simultaneously made it illegal to close schools or shut down movie theaters.

The result of this approach to the access problem is now so plain to see that it is virtually inarguable: Lawyers alone are insufficient to solve this crisis. We have tried — beyond any doubt, we have done our absolute best to employ one and only type of solution to the access problem, year after year, decade after decade. Yet we have not solved the crisis — indeed, we have seen it become radically worse throughout the last several years.   

We will not make any progress towards our goal of solving the access crisis unless we acknowledge this reality and deal head-on with its implications.

I am not here to tell you that giving Californians access to limited-licence practitioners, or court navigators, or AI-driven chatbots, or online interactive software for producing legal documents, is going to solve the access-to-justice crisis. I am here to tell you that unless we try to find out — unless we create the conditions for a series of controlled experiments to test our hypotheses — we will not move one inch closer to solving our problem. The “lawyers-only” approach has had 100 years to show what it can do — at this point, its failure must finally be conceded. 

Concerns and Responses

You might have legitimate concerns about the welfare of Californians who try these novel and untested methods, and those concerns are valid. Those concerns are explicitly addressed by the “Sandbox Model,” wherein alternative providers are: 

  • minutely examined and thoroughly questioned before they can interact with the public, 
  •  closely monitored and tightly regulated by a specialized oversight body during their interactions with the public, and
  • subject to subsequent data collection and assessment of their impact on the members of the public they have served.

You might also have legitimate concerns about whether these changes would pose a threat to lawyers and their livelihoods, and those concerns are valid. In response, however, I would observe that by its very definition, the access-to-justice crisis afflicts a portion of the market that lawyers do not serve. 

For lawyers to be threatened by these new providers, it would have to be the case that the markets and customers sought by these new providers coincide or overlap with the markets and clients served by lawyers. We know that is not the case. These are two parallel markets. Lawyers’ livelihoods will not be affected by the presence of alternative providers, precisely because they are “alternative” to lawyers.

Finally, you might have legitimate concerns about whether California is breaking precedent and moving too soon to explore the Sandbox option, and those concerns are also valid. But as you know, Utah is already forging ahead with the “Sandbox” regulatory experiment, and it seems likely that Arizona will shortly join Utah as a pioneer in American legal re-regulation. Task forces recently commissioned in Florida, North Carolina, and Connecticut, when they file their reports, seem likely to arrive at similar conclusions as did the Utah, Arizona, and ATILS task forces.

California need not fear being too early a pioneer. Before too long, it could be seen instead as too late a follower.

The Time is Now

In conclusion, I wish to urge you again to approve — not the establishment of alternative legal providers in California, not even the establishment of a regulatory Sandbox in California, but the exploration of the possibility of establishing such a Sandbox in California. It is almost literally the least disruptive and least controversial step that the Board of Trustees can take at this critical moment in time. 

I must also note that the current COVID-19 pandemic is certain to place an unbearable burden on our justice system. Courts worldwide are already finding themselves forced to cancel trials and shut courthouses. Law firms in Pennsylvania have been explicitly ordered to close their doors, and other states are sure to follow in the coming days. The justice system is going to grind to a halt, while the needs of Californians for justice and legal services in a pandemic will accelerate and metastasize. The time for action is today — right now.

Multi-faceted remedies applied simultaneously are the only way we will survive the coming pandemic. In exactly the same way, multi-faceted remedies applied simultaneously appear to be the only way to solve the access crisis. In order for us to find out whether this is correct, we have to try — to allow merely the opportunity to explore and test alternative measures. The power to try is now solely in your hands.

Contagion

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Posted in: Access, Governance

Back in July 2018, I noticed that the State Bar of California had created a task force to consider whether regulatory reforms could improve access to justice in that state. I wrote about this development with what you might call jaded optimism:

The smart money, the obvious prediction, says this task force will come to nothing, that the forces of intransigence will chalk up another win by making the right arrangements with the right power brokers, or simply by stonewalling until the reformers tire themselves out. … 

But here’s the thing: Eventually, change does arrive, often when you least expect it. At some point down the road, power in the legal market will shift away from lawyers just enough to enable new expectations, assumptions, and rules for how legal services are created and delivered….

There will be a moment when that shift begins. This might even be it.

A little over a year later, an extraordinary series of events, unprecedented in the modern legal profession, began to unfold. You might be aware of some or even most of them, but it’s not until you see them arranged chronologically that you fully appreciate just what has happened in the American (and Canadian) legal profession in a shockingly brief period of time. With quotes from the linked reports, here’s the chronology:

●  August 28, 2019: “The Utah Supreme Court … has unanimously approved a work group report that lays out recommendations for narrowing the access to justice gap by reimagining lawyer regulation. … The work group outlined a new structure for regulating legal services by: 1) loosening the ethical restrictions on lawyers in the Rules of Professional Conduct and 2) creating new regulations for companies and others providing some legal services. The report recommends amendments to Rules restricting lawyer advertising, as well as Rules prohibiting lawyers from fee sharing with non-lawyers or allowing non-lawyers to have ownership or investment interest in law firms.”

● October 8, 2019: “The Chicago Bar Association and the Chicago Bar Foundation launched a joint task force to respond to the market failure in consumer legal services. … [The task force will have] five working committees, which include areas such as ‘Modernizing Lawyer Referral & Law Firm Models,’ ‘Optimizing the Use of Other Legal Professionals’ and ‘Partnering with Online Legal Service Providers and Other Businesses and Technology Entities.’ … A public comment period is expected during the summer of 2020, with a goal for submitting recommendations to the Illinois Supreme Court in September 2020.”

● November 6, 2019: “The Florida Supreme Court has asked The Florida Bar to undertake a study of the rules governing the practice of law in order to determine whether revisions are needed to improve the delivery of legal services within that state. The Supreme Court directed the committee to look into the topics of lawyer advertising, referral fees, fee splitting, entity regulation, regulation of online service providers, and regulation of non-lawyer providers of limited legal services. … The letter asked that the study group complete its work and submit a final report by July 1, 2021.” (More details here.)

● January 1: 2020: Pursuant to recommendations of the Legal Services Task Team created by the Law Society of Saskatchewan and the provincial Ministry of Justice,  “amendments to The Legal Profession Act, 1990 include a clearer definition of the practice of law. The Task Team also recommended expanding the list of exemptions to the unauthorized practice provisions and creating limited licences that may be granted by the Law Society to non-lawyer legal service providers on a case-by-case basis.” (Also on January 1, the Law Society of Saskatchewan launched a proactive entity regulation regime.)

● January 9, 2020: “The creation of [Connecticut‘s] State of the Legal Profession Task Force was driven by the access-to-justice gap, as well as the challenges lawyers face in the current system. … Various task force subcommittees will examine alternative business models, how technology can be leveraged to advance the legal profession, and ethics rules. …The task force is aiming to produce a report by 2021.”

● January 20, 2020: “The Law Society of British Columbia‘s … futures task force has released a consultation paper and … is seeking input from lawyers, notaries, paralegals, the judiciary, organizations and the public to assist in its consideration of what legal practice will look like over the next decade, in particular the factors and forces that are likely to influence the delivery of legal services and the regulation of the legal profession.” The deadline for public comments was Feb. 29, 2020.

● January 23, 2020: “[The Global Legal Practice Committee of the ] D.C. Bar announced it will study evolving legal service delivery models in the U.S. and abroad, including non-lawyer ownership of law firms. … The possibility of loosened law firm ownership rules in the nation’s capital could be of special interest to the Big Four accountancies.” The deadline for public comments was March 9, 2020.

● January 30, 2020: “The New Mexico Supreme Court endorsed proposals to expand civil legal services in the state, particularly to lower- and middle-income residents and those living in rural areas.” The report recommends the creation of a Court Navigators program and further study of the licensing of non-lawyers to perform limited legal work.

● January 31, 2020: “A petition to the Arizona Supreme Court from Dave Byers, a member of the Arizona Task Force on the Delivery of Legal Services, proposes ‘substantial’ rule changes led by the proposed elimination of a rule forbidding non-lawyer ownership stakes in law firms and legal services operations. … The proposed rule changes will be considered at a rules conference in August. That will be preceded by a public comment process.”

● February 5, 2020: “…  and whereas experimentation with different approaches to regulatory innovation provides a measured approach to identify and analyze the best solutions to meeting the public’s growing legal needs, the [United States] Conference of Chief Justices urges its members to consider regulatory innovations that have the potential to improve the accessibility, affordability and quality of civil legal services, while ensuring necessary and appropriate protections for the public.”

● February 7, 2020: “The Illinois Attorney Registration and Disciplinary Commission (ARDC) has published for public comment an Intermediary Connecting Services Proposal [that] would regulate lawyers’ participation in for-profit matching services and regulate the services themselves. … The proposal would regulate lawyers’ participation in for-profit matching services and regulate the services themselves.” Comments are open until April 3, 2020.

That’s one way to put it.

● February 16, 2020: “The Association of Professional Responsibility Lawyers … in an access-to-justice report [that] could be released as soon as August … likely will make concrete suggestions, including rule changes, to spur states to increase access to legal services. This could include suggested changes to Rule 5.4 to open law firm ownership to non-lawyers, alterations that could redefine who can practice law, and reforms to make cross-state border representations easier. APRL is relatively small when compared with the ABA, but its recommendations in issues like lawyer advertising have carried weight.”

● February 17, 2020: “An overwhelming majority of the ABA House of Delegates agreed to approve Resolution 115, which encourages state regulators and state bar associations to explore regulatory innovations that could improve access to legal services, and to collect data on those programs. But the resolution also notes that it should not be construed as recommending any changes to the ABA Model Rules of Professional Conduct, including Rule 5.4, as they relate to non-lawyer ownership of law firms, the unauthorized practice of law, or any other subjects.”

● February 25, 2020: “The [California State Bar] Task Force on Access Through Innovation of Legal Services approved eight recommendations that will go to the bar’s board of trustees next month. The task force stopped short of calling for immediate changes that would allow non-lawyers to take an ownership stake in law firms. The group also opted for only a modest expansion of fee-sharing. Instead, the 22 members pinned many of their hopes for reform on the creation of a trial program for entrepreneurs known as the ‘regulatory sandbox.’ … The recommendations are scheduled to go to the bar’s board of trustees March 12.”

● March 9, 2020: “The Manitoba government is taking the first step to making legal services more affordable and accessible. … [New] legislation would let the Law Society of Manitoba designate and regulate another category of legal service providers, which would be called a limited practitioner. … The changes were suggested by the Law Society of Manitoba after a review found there were legal needs that weren’t being met and there was a need for more affordable alternatives for legal advice, information, and representation.”

● March 31, 2020: The State Bar of North Carolina has created an Issues Subcommittee to Study Regulatory Change. The Subcommittee will “examine the impacts that lawyer regulations have on access to justice and national reform trends.” The Subcommittee will hold its first meeting on March 31, 2020.

It will be almost exactly eight months between the approval of Utah’s Task Force Report and the first meeting of the North Carolina Subcommittee. By end of day on March 31, ten American jurisdictions, three Canadian provinces, the American Bar Association, and the US Conference of Chief Justices will have either launched task forces to examine legal regulation reform or have taken significant steps towards encouraging such reforms or actually implementing them.

Three brief observations.

1. It would be not just clichéd to call this series of events “a domino effect,” but also misleading. Many of these reform initiatives were conceived and carried out contemporaneously, with some awareness but only limited knowledge of what was happening in other jurisdictions. There is an element of synchronicity here: This wasn’t so much a series of cause-and-effect occurrences as a tectonic shift in the subterranean landscape of the law, manifested in several locations in less than a year.

The reality of a full-scale access to justice crisis seems to finally be registering with those who lead and regulate the legal profession, and these 15 separate reform efforts are the first results. All across the North American legal profession, many people appear to have had the same thought at about the same time: “This can’t go on.”

2. These efforts are not uncontested. State Bar presidents from New York, New Jersey, Ohio, Pennsylvania, Delaware, and Illinois fought the original ABA Resolution 115 and required the insertion of clauses protecting Rule 5.4 in order to win their support. Resistance by lawyers to regulatory reform efforts in California seems to have led that state’s Task Force to slightly downsize the scope of its recommendations. Hardly surprising, though no less disheartening.

But it’s important to recognize that this opposition has not yet thwarted or halted the reform efforts. As I told Law360, the amendment to the ABA resolution did not detract from the resolution’s scope or impact, but only clarified the limits of how the resolution should be interpreted. Reform opponents are playing a “prevent defence” rather than mounting any offence of their own, trying to slow the train as it leaves the station or preserve old exclusivities for a little while longer. Re-regulation has the momentum, and those on both sides of the issue seem to understand that.

3. The title of this post is obviously provocative, standing as we are in the rising shadow of a true crisis of contagion. But I chose the title deliberately, and not just because the spread of legal regulation reform across multiple jurisdictions feels infectious.

It seems likely that our society is about to enter a period of social and economic upheaval. If everything breaks right, it will be a brief, containable wave of sickness, followed by a short-term recession — a lot of extra hand-washing, cancelled trips and other inconveniences, but nonetheless an experience that passes like a summer storm. Or it could be something much more serious.

The further down that spectrum we’re taken by the COVID-19 crisis, the more transformational will be its effects on our economy, our governance, and maybe most importantly, our social contract with each other. Part of that social contract is that the elites who run things in our society are given license to do so on the condition they run things for everyone’s benefit. There is a lot — and I mean, a lot — of doubt in many people’s minds about the validity of that deal. When 39% of Americans would have trouble covering an unexpected $400 expense (and 12% couldn’t do it at all), how could they possibly manage a health emergency? Or a legal one?

So it might not be surprising to find, when we emerge from this coming crisis, that the terms of the relationship between the legal profession and wider society have begun to change. Even if the crisis is contained and short-lived, existing frustrations with the broken legal system will be exacerbated and amplified, and regulatory reform is likely to come swifter and more thoroughly.

But if the crisis is neither contained nor short-lived, then there might even be a Great Re-Ordering ahead of us, a turning point at which anger over a broken system turns into action, and deference to elites gives way to hostility, protest, and a readiness to rewrite that social contract.

So these legal regulation reforms might not be outliers at all; they might simply be preparing the legal profession for our new normal. Because as we’ve witnessed over the past eight months, radical new ideas can be contagious.

How to save the lawyer development system

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Posted in: Governance, New Lawyers

I bring news from the places where lawyers gather. In addition to presenting at several law firm retreats in 2019, I’ve also spoken to meetings of law firm administrators, law firm knowledge officers, legal industry analysts, and law students and professors. As you might imagine, these are disparate groups that tend not to agree on a whole lot.

Yet consistently, in audience questions and hallway conversations, one common concern kept arising at all these events — that the lawyer development system is in serious trouble and could be headed towards collapse. This post is intended to describe the problem and propose potential ways for us to avoid what might otherwise be a professional disaster.

Let’s start by defining our terms. By “lawyer development system,” I mean the structured yet largely informal process by which a law student on her first day of classes eventually becomes a confident, competent lawyer providing legal services of value to clients. Obviously, this process stretches well beyond one’s call to the bar: Way back in 2010, I suggested that it takes seven years for a first-day law student to reach that point, although in a brief survey I conducted in 2017, some lawyers said it took an additional five to ten years after graduation before they felt like a “reasonably confident and competent lawyer.”

So by these lights, the lawyer development process requires anywhere from seven to thirteen years of a person’s life, starting from their first day of law school. I need hardly point out that in most countries, we credential lawyers three or four years into that process and expect them to bill well over a thousand hours annually by the end of their fifth. Much of the lawyer development process, therefore, involves experiential learning on real client matters, long before the point of confident competence has been reached.

Most importantly, responsibility for the lawyer development process is diffused throughout the legal ecosystem, with no single entity holding full authority over and answerability for the process and the results. This is what I mean by “structured yet informal” — if it takes a village to raise a child, then it takes an entire legal market (including law schools, bar examiners, law firms, and clients) to raise a lawyer, without anyone technically in charge of the whole process.

I personally think that’s a pretty ragtag way for one of the world’s great professions to sustain itself. But to all the criticisms we can level against this system, one defence is hard to refute: It works. Lawyers are here, and we provide people with legal services, and the world hasn’t ended. It might not be a thing of beauty, but the system works.

Until it doesn’t. What people in law firms and law schools have been telling me over the course of this year is that they’re deeply worried about the lawyer development system. Specifically, they’re saying: “We don’t know where the next generation of lawyers is going to come from.”

Let’s start with one of the legal profession’s oldest truisms: Law schools don’t teach people how to be lawyers. Not only is this inarguably true, I don’t see how it could be otherwise. If it takes an average of 7 to 13 years to really “become” a lawyer, law school can do no more in its three years than get the ball rolling. Law schools are not set up to teach people how to deliver legal services to clients, and they can’t be reconfigured to play that role without gutting them and converting them into completely new entities. If we want to have lawyer development academies that mix classroom instruction with supervised work opportunities for ten years before granting a license to practise law, that’s fine; but that’s not the world we currently live in.

And anyway, law schools haven’t had to “teach people how to be lawyers,” because the profession has effectively outsourced this job to the private sector. Most lawyers’ early development time — say, between three and eight years after their first day of law school — is spent working for more experienced lawyers (usually in law firms) rather than directly for clients. The well-worn path looks like this:

  • Step 1: Get hired as a new associate at a law firm.
  • Step 2: Work really hard.
  • Step 3(a): After a period of six to twelve years, accept an invitation to join the equity partnership, after which you can continue to work really hard while getting a cut of other lawyers’ revenue.
  • Step 3(b): Alternatively, anytime between the first and twelfth year on the job, leave the firm to join (i) another law firm, (ii) a corporate or public-sector law department, (iii) sole practice, or (iv) some other type of employment inside or outside the legal market.

I expect that would describe the path into the legal profession for at least 90% of the lawyers reading this post, as well as for their colleagues and supervisors. It’s so ingrained into the profession that we scarcely notice it anymore. We take it for granted that once we leave law school, a wide range of private businesses will welcome us into the working profession and pay us an annual salary to bill thousands of hours to clients while learning the intricacies and nuances of law practice.

Not every law firm does a good job of developing lawyers, of course. At many law firms, the quality of these early years of lawyer development is pretty abysmal: On-the-job experience substituting for actual training, trial-and-error learning taking the place of mentored instruction, and crushing billing pressures outweighing almost all other considerations. But this system more or less does the job of getting new law graduates from knowing nothing about law practice to knowing something about it, inside a (relatively) quality-controlled environment.

To be clear, law firms don’t play this critical role in the lawyer development system just to help the legal profession. It’s not an act of charity. They do it because they can bill their associates’ time spent working on basic, low- to medium-level tasks, pay them less than the revenue they generate, and pocket the resulting profits. And even though attrition will cost them most of these lawyers over the years, one or two will make it through this gauntlet ready to buy equity in the firm and keep the place solvent for another year. The rest of those new hires will eventually fan out across the legal market and keep the lawyer landscape populated.

This entire system, however, with all its benefits and faults, rests on a single and increasingly fragile foundation:

  • Step 1: Get hired as a new associate at a law firm.

Law schools, bar admission personnel, and (without realizing it) clients all assume that law firms will keep doing what they’ve been doing for years: Hire new lawyers and show them the ropes. The entire lawyer development system hinges on law firms acting as that bridge out of law school. If law firms were to stop doing that, or even to severely curtail their new-lawyer hiring, it’s not an exaggeration to say that this system would simply break down.

I submit that we’ve already entered this process, right now. It looks like this:

1. The “low- to medium-level tasks” that used to occupy associates’ time have been migrating from law firms to more cost-effective performers such as software, ALSPs (including a growing number of law firm spinoffs and subsidiaries), and clients themselves. These tasks are routine and highly procedural, yet law firms still want to perform and bill them the same way they perform and bill highly specialized partner tasks. That value mismatch means firms have difficulty competing for this work. The US economy has been surging for almost a decade, yet “the overall growth trend for demand for law firm services [in that time] has been essentially flat to negative in every year.” That lost demand for law firm hours is very probably “associate work” that is no longer being given to associates.

Courtesy Prof. William Henderson. Click to enlarge.

2. As the volume of (formerly) “associate work” coming to law firms declines, firms respond by employing fewer new lawyers. It’s not as if firms actually need more than a handful of new associates in any given year to become future partners — the rest are hired only to bill hours, and if there are no hours to bill, why hire them? The essential Prof. Bill Henderson crunched the data last year and found that the number of entry-level jobs in private practice in the US declined from 20,611 in 2007 to 16,390 in 2017, a 20% drop. Large law firms, which shoulder about a quarter of first-year lawyer hiring, brought in 139 fewer first-year lawyers in 2017 than in 2007, even though these firms’ non-first-year lawyer population grew by nearly 40% during that time (from 65,212 to 90,867).

3. Now consider that the migration of low- to medium-level tasks from associates to more efficient providers has only begun. The development of technology for automating basic legal work is accelerating, along with growing acceptance (by both buyers and sellers) that legal work should be carried out by the most appropriate performer or platform. The Law Society of England & Wales studied this phenomenon and concluded that “the number of jobs in the legal services sector will be increasingly affected by automation of legal services functions” — in fact, it estimated that over the next 20 years, the equivalent of 67,000 full-time legal jobs will be consumed by technology. Note that the US has about 10 times as many lawyers as does England & Wales.

In “Legal Professionals of the Future: Their Ethos, Role and Skills,” Prof. John Flood writes that “the effect of automation here could be dramatic, in that if junior associates were to be gradually culled from firms, the entire reproduction of the legal profession could be jeopardized, since law firms are structured around associates being promoted to partnership.” Joe Patrice at Above The Law calls this the path towards “the death of the junior attorney,” writing: “Sooner rather than later, firms are going to slow their junior hiring and focus on a narrower range of candidates. … If the training regime for young lawyers isn’t addressed, the population of competent attorneys … will simply dry up.”

Are law firms aware of this issue? Of course. But they are neither structured nor incentivized to do anything about it. They are far more interested in acquiring established partners with mobile clients to boost immediate revenue (even though those efforts frequently disappoint), in shrinking the size of the equity circle (thereby growing profits for those inside), and delaying partnership admission for their remaining associates as long as possible. They are fixated on maximizing short-term partner profitability, and first-year associates could not be further removed from that goal. Rightly or wrongly, law firms do not consider the future of lawyer development to be their problem. They are increasingly less willing and less able to take on this job.

So whose job is it? I come back to my initial observation that the lawyer development system has been outsourced to and diffused among many different stakeholders. Each of those stakeholders will be happy to tell you that it’s someone else’s job to train and develop lawyers; none of them wants to step up and take on this immensely important (and expensive) responsibility. But the outsourced-and-diffused solution has just about run its course, and something has to replace it — something unified, principled, systematic, and clear about its purpose and goals.

For my money, there’s only one correct answer to the question of whose problem this is, and who is responsible for finding a solution. In a self-regulating profession, responsibility lands squarely on the professional regulator. Whether that’s a state bar, a state court, a law society, or a special regulatory board, this entity is statutorily charged with ensuring that the lawyers who deliver legal services to people and businesses are competent, trustworthy, and reliable. That is job #1. If the entity cannot do that, then it might as well close its doors and forfeit professional self-regulation to the government. (Governments might be only too happy to take on the job if they feel lawyers aren’t up to it.)

Too many regulators are currently obsessed with pursuing “unauthorized” legal services providers, or with defending their own territory, or even with laudable goals like increasing access to justice. I submit that none of these activities is as central to the self-regulatory mission as saving and enhancing the lawyer development system, and I believe that regulators should make this their primary focus immediately. Governments can punish malevolent or rogue legal providers through criminal prosecution, and they can increase access to legal services by legislating open markets and restoring public funding for legal aid. But only lawyers can fix the lawyer development system.

How could we go about this? Here’s one suggested route forward for a professional legal regulator to consider.

  1. Drop all the extraneous activities and functions described above and concentrate your limited resources and political will on this subject.
  2. Identify the core professional competencies lawyers must possess at various stages of their development. Canada and Great Britain have already done this for you, although neither jurisdiction has yet implemented these competencies as part of their lawyer admission regime.
  3. Accredit any educational or training institution that will develop these competencies in lawyers over a minimum period of five to seven years at the start of lawyers’ careers. Inform law schools that they can keep their accreditation if they agree to deliver these competencies and prove they can do so.
  4. Invite law firms interested in participating in the development of competent lawyers to submit detailed plans for the hiring and close supervision of lawyers, in conjunction with an accredited competence delivery institution.
  5. Credential lawyers in stages, much as novice drivers are allowed to drive only at certain times and with adult passengers, or as medical interns are licensed only to carry out certain basic procedures. Abandon the absurd fiction that a newly called lawyer is entitled to do anything a veteran lawyer can do.
  6. Be fully transparent about this process to government and especially to the public. Let people access detailed assurances about the nature, quality, and reliability of what they’re getting when they hire a lawyer.

The foregoing is only an outline, and professional development experts can surely improve on it. But I don’t see that the task in front of us can be accomplished by anything much less radical than this. Law schools would fall and rise, creating a brand new educational landscape for lawyers. Professional self-regulation would be transformed into what it should always have been: keeping our own house in order so that society is demonstrably and thoroughly well-served by lawyers. Lawyers themselves would become confident and competent much earlier in their careers, accelerating their timelines for delivering real client value and improving their mental and emotional well-being in the process. By resolving one impending crisis, we can tackle and solve many other lingering problems.

It’s time to stop blaming law schools for not doing regulators’ job. It’s time to recognize that law firms won’t do this job anymore and shouldn’t anyway. It’s certainly past time to stop making clients do this job through lawyers’ trial-and-error learning process. It’s time the legal profession took the privilege of self-regulation seriously by unifying, clarifying, redesigning, and transforming the lawyer development system.

Partner succession and law firm ownership

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Posted in: Governance, Law Firms

What follows might look like a proposal to address law firm partner succession challenges. But it’s actually a thought experiment in regulatory policy for the legal profession.

As the Boomer generation of law firm partners continues to exit the demographic python, firms increasingly struggle with partner succession challenges. The unwillingness or inability of senior lawyers to transition their practices to younger colleagues has many contributing causes, including:

  • The partner’s refusal to begin winding down and transitioning his practice at its most profitable point,
  • The partner’s desire to sustain the power and privileges of his influential position within the firm,
  • The partner’s reluctance to face the looming end of a career that has given his life definition and value,
  • The partner’s unreadiness to “return to civilian life” after decades in a cloistered law firm environment, and
  • The partner’s misgivings about whether a junior colleague could replace him or serve his clients as well.

The degree to which any of these factors plays a role in the succession challenge varies from partner to partner. But I think the first factor in that list — the partner’s unwillingness to shrink and eventually cut off what is probably a substantial income derived from partnership — is common to virtually every case of “succession-itis.”

Once you leave the equity circle of a law firm, your entitlement to receive any share of that firm’s profits, regardless of how important your contribution to the firm’s success might have been, comes to a swift end. This, of course, is because legal regulators in most jurisdictions prohibit ownership of law firms by anyone who is not a lawyer (But see California.) Or, to be more precise, anyone who is not a practicing lawyer. And that brings me to the proposal: What if lawyers could maintain their equity in law firms after they retired from practice?

Suppose your jurisdiction amended its ethics rules such that a lawyer who holds equity in a law firm could maintain that equity, or some portion thereof, after she retired from practice. That lawyer would no longer face the prospect of an immediate end to her legal income stream, thereby removing a significant disincentive (although not the sole one) to her retirement. This continuing revenue could serve as a sort of “pension” for partners who otherwise must fund their own post-retirement income. Moreover, since this income would depend upon the ongoing success of the firm, the partner would be incentivized to properly transition her practice and clients to a competent younger lawyer, perhaps one whom she’s been grooming for years. If the firm flounders after she leaves because she did a poor job of practice transition, she would be jeopardizing her post-retirement income stream.

Now, regulators being regulators, they could and likely would create various limitations on this post-retirement equity position. They might rule that post-retirement equity requires X years of partnership in a firm before it kicks in, or that the equity share cannot be transferred and expires upon the partner’s death, or that the partner forfeits this share if she joins another legal services supplier or is appointed to a court or tribunal, or that the equity share would be capped at 65% of a practicing partner’s share, that sort of thing. We can play with the permutations and exceptions all day.

But I’m more interested in how the regulator would view the underlying premise of the proposal. Because while I think it’s very unlikely that this change to law firm ownership rules will occur anytime soon, it’s the policy challenges that I think are worth examining.

Upon what basis would a regulator turn down this proposal? What would be the objection to allowing retired lawyers to own equity in a firm? I suppose you could argue that a lawyer who no longer actively participates in the partnership should not be entitled to any income from the firm — but that’s hard to reconcile with the fact that a legal secretary who retires from the same firm is entitled to a pension funded from her own contributions of both hard work and money over many years. Why should a lawyer not have the right to receive an ongoing financial payout from a firm she helped to build into a success?

The potential objections around “non-lawyer” ownership are also interesting. Should a lawyer who retires from practice be considered a “non-lawyer,” the same as someone who never attended law school and practised law? Does the retired lawyer no longer meet the “character and integrity” tests that evidently separate people who are lawyers (worthy of law firm ownership) from people who are not (and therefore not worthy)? Unless we argue that lawyers lose their qualifying degree of character and integrity when they stop serving clients — and I don’t think any legal regulator wants to make that argument publicly — then I’m not sure of the policy position against this idea.

I’m not seriously proposing this change to the ethics rules, for what it’s worth — it likely would prove highly cumbersome to formulate and a huge hassle to regulate and enforce. (Although I’ll wager that, if such a proposal ever did make its way to a regulatory body, it would provoke keen interest from every lawyer over 60 on that body.) I’d much prefer comprehensive, principled reform of law firm ownership rules, rather than piecemeal exceptions that are, once again, all about the lawyers.

But I do think this thought experiment can focus our attention on the presumption behind the “only lawyers can own law firms” rule: that lawyers deserve to own law firms and “non-lawyers” do not. Why is that? What is it about lawyers — precisely and in detail — that qualifies them to own law firms? What is it about “non-lawyers” — precisely and in detail — that disqualifies them? What happens to a person when they leave the “lawyer” category and join the “non-lawyer” category? Are they downgraded somehow, and if so, in what respects, and why?

I don’t have good answers to any of these questions. But I’d be very interested in learning what the answers might be.

Hope vs. experience in California

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Posted in: Access, Governance

What we know: The State Bar of California is creating a task force that will examine whether to modify ethics rules requiring that only lawyers may own equity in law firms. The Task Force’s commission followed the acceptance by the Bar’s Board of Trustees of a “Legal Market Landscape Report” commissioned by the Bar from Prof. William Henderson of the University of Indiana Maurer School of Law. That excellent report, extensively researched and detailed, argues that requiring lawyers to be the sole equity owners of law firms stunts the development of more productive, one-to-many legal services delivery and contributes to a system-wide legal access crisis.

What we don’t know: pretty much everything else.

The question everyone’s asking is: Has the game-changer arrived? Is this the American equivalent of the 2003 appointment of Sir David Clementi to examine the legal regulatory structure in England & Wales, the first pebble in the coming avalanche?

My early answer is this: The chances that California’s task force will result in fundamental reform to law firm ownership rules in the United States are higher than they’ve ever been. That doesn’t mean they’re particularly high.

It makes all kinds of sense to be cautious here. No legal regulator, in any jurisdiction, has ever voluntarily renounced the ban on non-lawyer ownership. In both Australia and England & Wales, it was direct government intervention that started the process — and in both cases, that intervention followed extensive criticism of legal regulators for failing to address client complaints about lawyers. Whenever the spectre arises of “non-lawyers” in legal services delivery, the legal profession mobilizes immediately and throws its considerable weight against the prospect. Toby Brown summed up the strong case for skepticism more than three years ago. It would be foolhardy to bet against the lawyers here.

But if you were ever going to make that bet, this would be the time to do it. There are several factors at play here that could justify the idea that maybe, possibly, this time is different.

  • Last fall, the California State Bar “deunified,” spinning off its trade association activities into a separate non-profit and keeping its regulatory and disciplinary functions. The Bar no longer suffers from conflicting mandates to both govern lawyers in the public interest and advocate for those lawyers’ interests; only the first directive survives. The regulator appears to be taking its “recent reforms and clear public protection mandate” seriously.
  • The Bar’s new Board of Trustees has 14 members, only seven of whom are lawyers. All are appointed by the state Supreme Court, legislature and governor, rather than elected by the legal profession. Speaking from a jurisdiction where the regulator’s governing board is directly elected by lawyers, following extensive campaigns in which candidates promise to “represent your interests,” I can tell you that this is no small thing.
  • The report was commissioned pursuant to Goal 4 of the Bar’s 2017-2022 Strategic Plan, “Support access to justice for all California residents and improvements to the state’s justice system,” objective (d): “…determine if any regulatory changes are needed to better support and/or regulate the expansion of access through the use of technology in a manner that balances the Bar’s dual goals of public protection and increased access to justice.” There’s a pretty clear theme here.
  • The task force’s mandate is not neutral or deferential towards the status quo. Rather, the task force is to conduct an analysis of “possible regulatory reforms,” a phrase that at least suggests the task force is supposed to come back with findings a little more robust than “everything’s fine the way it is.” Task forces tend to examine their commissioning documents closely and parse the language that was used to launch them.
  • This isn’t just any state: It’s California, home to 250,000 lawyers and an historic pioneer in public policy reform. More importantly, it’s home to many alternative legal services providers, online document providers, managed legal services companies, legal outsourcers, and legal technology startups. They’ll have pockets deep enough to support any kind of lobbying efforts they might wish to make, in conjunction with access-to-justice organizations and chambers of commerce.

Now, even taking all that into account, the challenges here are immense. The legal profession in California and nationwide will almost certainly throw everything it has against the possibility of regulatory reform emerging from this process. A lot will ride on the membership of the task force, which hasn’t been chosen yet: A chair or prominent member with strong views about the preservation of lawyer exclusivity in legal services could easily drive the task force where every previous reform effort has wound up. And even if California did decide to expand ownership of law firms beyond lawyers, that won’t happen before late 2020 at the earliest, and it would galvanize opposition by the organized bar elsewhere. It would be a significant step forward, but it wouldn’t be the tipping point by itself.

But imagine for a moment what the legal market might look like if this reform actually happened. We’d find out if reform opponents were right all along, when they warned of  “non-lawyer” owners compromising lawyers’ judgment, abandoning legal ethics in favour of quick bucks, and exploiting vulnerable and under-informed clients with shoddy services and poor advice. The challenge for these opponents is that England & Wales has allowed “non-lawyers” to hold equity positions in firms for seven years, and there’s been little or no evidence of these outcomes unfolding there.

And on the list of potential benefits? Law firms offering equity positions to professionals and technicians from outside the law to restructure processes, build high-tech systems, and serve clients directly. Deeper cash reserves, enabled by injections of funding from outside investors, to finance technology and marketing upgrades. More non-lawyer equity holders moving in to replace retiring senior lawyers, thereby maintaining or growing the firm’s capital base. And ideally, the establishment of online legal services providers with the resources to offer the best of both NewLaw and OldLaw: low-cost, high-efficiency legal documents and services combined with high-quality legal assistance and advice from good lawyers. Not all of these benefits will be realized. But even one would be pretty great.

I’ve been in this business too long to harbour any illusions about the legal profession’s willingness to change. The smart money, the obvious prediction, says this task force will come to nothing, that the forces of intransigence will chalk up another win by making the right arrangements with the right power brokers, or simply by stonewalling until the reformers tire themselves out. The odds still favour that outcome, as they always do.

But here’s the thing: Eventually, change does arrive, often when you least expect it. Nothing stays the same forever, and believing that it will just makes it easier for nothing to change. I still root for the triumph of hope over experience, in spite of experience’s long winning streak. At some point down the road, power in the legal market will shift away from lawyers just enough to enable new expectations, assumptions, and rules for how legal services are created and delivered — just enough to start benefiting the people who need legal services more than the people who provide them.

There will be a moment when that shift begins. This might even be it.

Law firm ownership and lawyer independence

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Posted in: Ethics, Governance

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

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Posted in: Governance, Innovation

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

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Posted in: CLE, Governance

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?

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Posted in: Governance

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.