9/5/11

Is Practice of Law Already Deregulated?

Recently the Germans came out saying the Americans should align with them against the UK Legal Services Act (LSA) initiative. This caught my attention as I have been giving quite a bit of thought to the whole LSA issue based on a presentation I did at the ILTA conference. The presentation was actually not on the LSA, instead it was on out-sourcing and the emerging role of Legal Process Outsourcers (LPOs). One of my observations about LPOs is that I believe they are now in direct competition with law firms. In other words:
LPOs hire lawyers and sell services directly to clients.
It was my understanding that you needed to be a law firm in order to sell legal services directly to clients. So in preparing for my out-sourcing presentation I did some homework on the subject. A conversation with a Bar executive from a mandatory bar left me perplexed. The outcome of that conversation was shades of gray. With lawyers providing the services it is not the Unauthorized Practice of Law (UPL). Online research turned up opinions from the ABA and several other bars on the subject. There is apparently no clear regulations barring companies from hiring lawyers and selling services, provided the client has licensed in-house counsel who “adequately supervises” the final work-product. So LPOs may be in the clear. As long as some lawyer is clearly the buck-stop player and the Bar knows whose bar license to go after, then things may be OK.
So I guess this means 3 Geeks can hire lawyers and start selling services to clients, provided the clients have their own lawyer(s) to supervise the work product. Stretching this idea only a bit further, if the client does not have a lawyer, we just need to make sure they hire one independent of us to serve as their contract in-house counsel for final review.
Even to me this sounds like quite a stretch, but help me out here. What is stopping 3 Geeks or anyone else from doing this? We would be functioning just like the current slate of LPOs.
One argument I received when I surfaced this idea over drinks at the ILTA conference was that the work LPO lawyers do could be done by paralegals or other non-lawyers, so it’s not crossing the practice of law line. Past conversations with Bar regulators suggest this argument will not stand. A legal judgment task performed by a paralegal (document drafting, document review, etc.) becomes the practice of law when performed by a lawyer.
And it’s not just LPOs: as far back as the 80s there were US-based legal research companies that employed lawyers providing “legal services” to law firms and clients.
So perhaps in the US instead of fighting for or against an LSA-type, deregulated landscape, we can just sit back and let non-law firms (I love typing that term by the way) raise capital, hire lawyers and provide legal services. Think of the competitive position such an entity could take in the market, driving down costs and increasing quality by using process and technology. Come to think of it, we may already be seeing just such companies emerge – ala Axiom and Clearspire.
Perhaps I should add IPO to my acronym mix.
To be clear, I am not saying LPOs are good or bad. I am merely raising the issue. In fact this may be an excellent catalyst to get law firms off of their collective rear-ends and actually engage.
Perhaps the reasonable market response from law firms will be to renounce their law firm status and become LPO-like entities.
Perhaps the legal industry in the US is already deregulated.
Ah – the future is interesting indeed.

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4 comments:

Jordan Furlong said...

I expect that a distinction will soon be made that officially separates a narrower "lawyer services" band from the broader "legal services" category. Something like this already exists in England & Wales, where legislation divides law-related tasks into "reserved legal activities" (generally, lawyers only) and "unreserved legal activities" (generally, anyone and their grandma). UPL as we know it, accordingly, stands a very good chance of being an empty vessel before the end of the decade, maybe sooner.

What we need to acknowledge as a profession is that "the practice of law" as we know it today is something of an historical anomaly: lawyers have long been performing many law-related activities without competition mostly because there wasn't anyone else around to compete. Our exclusivity emerged from the fact we were the only halfway competent entrants in the market, not from a time-tested demonstration of skill so superior that it required a ring-fenced franchise on legal services.

Now that new providers of these services have emerged, however, they can make legitimate claims to tackle many (but by no means all) kinds of work that lawyers have previously performed exclusively. Market rules dictate that all these providers really have to do is demonstrate competence and reliability -- clients will decide which options they like better and in what amounts. I expect the new providers will do better than most lawyers suspect. UPL makes little sense in a real, competitive legal market -- and it makes even less sense when administered by one of the competing parties.

There is no mistaking or reversing the trend towards fewer activities falling under lawyers' exclusive jurisdiction. All that's really left for us is adjust to it.

Jerome Kowalski said...

The fact is that while nobody was paying attention, a host of unregulated and unlicensed providers of legal services (perhaps we may not have a precise definition for the”legal services industry, but as U/S. Supreme Court Justice Potter Stewart said of defining pornography “I don’t know what it is, but I know it when it when I see it”), in the form of legal project outsourcing companies and Internet based providers of legal servicers have already taken significant market share. See, http://kowalskiandassociatesblog.com/2011/08/11/are-law-firms-going-to-be-replaced-by-internet-based-providers-of-legal-services/

Toby Brown said...

Thank you Jordan and Jerome for your comments.

You are both hitting on the definition of the practice of law issue. The challenge in addressing this issue is defining the practice of law in a defensible way, carving out those activities exclusive to a lawyer.

In my past experience with a mandatory bar, efforts to provide a useful definition always fell short. I recall one dialog where the only defensible ground for lawyers was appearing before a court of law. Everything else could be done by non-lawyers.

So I suggest caution to those looking for the hard-line behind which lawyers can safely stand. We may find not much space behind that line and much of what lawyers currently do pushed out into the open.

Jordan Furlong said...

Toby, I think you're exactly right, and that if lawyers are looking for a worse-case scenario, they'll find it behind that hard line, because that's going to be a small space. This:

I recall one dialog where the only defensible ground for lawyers was appearing before a court of law. Everything else could be done by non-lawyers.

should make lawyers very nervous, because it's eminently possible.

Like you, I'm not saying this is good or bad, but only that lawyers, individually and collectively, need to figure out exactly what is our value proposition to the marketplace. Once we ourselves have a confident grip on what "lawyer services" are, we'll be in a stronger position to lobby the relevant regulatory authority (which I suspect will not be lawyer-controlled) to recognize and enforce our primacy in that area.

But if we go into those negotiations saying, "'Lawyer services' is everything we've been doing for the last 50 years," then we're not going to get very far.

 

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