The Utah Supreme Court has tentatively adopted a concept wherein Utah would significantly loosen, or even repeal, a state Bar rule prohibiting law firms and other legal services operations from sharing fees with non-lawyers.
The recommendation to alter state bar Rule 5.4 and rule 7.1 (lawyer advertising) was included in a 71-page report highlighting suggestions for wide-ranging legal system changes, which the Utah Work Group on Regulatory Reform recently sent to our Supreme Court. The Supreme Court unanimously approved the report last week.
“(W)e view the elimination or substantial relaxation of Rule 5.4 as key to allowing lawyers to fully and comfortably participate in the technological revolution,” the report found. “Without such a change, lawyers will be at risk of not being able to engage with entrepreneurs across a wide swath of platforms.”
The stated motive is to improve access to justice for middle- and lower-income residents who can’t afford private attorneys in civil and family court matters.
But proposed changes to Rule 5.4 and Rule 7.1 have spurred concerns from many that the reforms could let the Big Four accounting firms and insurance companies gain a foothold in the U.S. legal market where they are not now permitted to operate. The proposal would likewise encourage non-legal corporations to invest in and own Law Firms and provide legal services to the public outside of any regulatory oversight by the Bar, albeit still under the regulation of the Supreme Court.
The American Bar Association and other legal industry groups have resisted such changes. They argue that the professional independence of lawyers in the U.S. needs to be maintained as a hedge against unscrupulous practices.
The Sandbox Approach
The Utah panel, co-chaired by the State Supreme Court Justice Deno Himonas and past president of the Utah State Bar John Lund, also recommended the simultaneous creation of a regulatory agency that’s independent of the Bar to oversee the provision of expanded access to justice legal services.
Non-attorney providers would be allowed to test their services in a “regulatory sandbox” through which data would be gathered. Proposed innovations would be tested further and revised before permanent legal service licenses were granted.
Any regulations the Sandbox develops would be evaluated based on risks to consumers and in relation to the legal service options currently available, among other factors, the report found.
Scenarios in which non-lawyers could operate or share fees in new legal companies include everything from consumer-facing legal services apps, to new law firm-type operations co-owned by big box stores.
“Technology, especially online legal services, exponentially increases the potential to improve access to justice,” the Utah report found. “But it also simultaneously increases the risk of legal and practical harm to users if those services are not of sufficient quality.”
Justice Himonas added that it's impossible for a judge to preside over a court of general jurisdiction and quickly see the "palpable" need for system-wide change. But at least one District Court Judge has expressed reservations, noting, "I have considerable respect for [Justice Himonas], John Lund and Dickson Burton. [But] I worry about a lawyer’s allegiance. Will it be to his/her client, the Bar, or to those whose financial interests are shared in the new business arrangements?"
While the final details have yet to be hardwired, the potential framework to better deliver legal services to our community is now before us. The reforms may constitute the best and most exciting opportunity for lawyers to participate in how we deliver legal services well into to the 21st century. But the Bar and the Court needs your critical evaluation.
Please review the Task Force
report
and share any concerns with your Bar commissioner.
