Regulatory Reform

Others Working on This

Deborah Rhode

Lawyers and legal services in the United States are regulated by a combination of rules, statutes, and judicial opinions, generally lumped in together and called the “ethics rules.” While the rules and interpretations of the rules vary from one jurisdiction to the next, the core of the ethics rules in US jurisdictions can be found in the American Bar Association’s Model Rules of Professional Conduct. Most US jurisdictions have adopted some form of the model rules, although many have made changes.

(I intent to expand this page to cover other countries, but I am starting with what I know best.)

While I general prefer not to talk about lawyers and non-lawyers, the ethics rules require a sharp distinction, because the rules regulate lawyers, not non-lawyers.

Under the ethics rules, each lawyer is responsible (and liable, if it comes to that) for their own conduct.

Individual v. Entity Regulation

That last point is one of the first places where some jurisdictions are beginning to reform the rules. In Australia, for example, the law firm (or other entity providing legal services), is regulated, not just the individual.

This is significant because many people believe non-lawyers should be allowed to own equity in a law firm. And some states are already experimenting with legal technicians who are not lawyers but are allowed to provide some legal services. However, the rules don’t apply to them. One of the ways to regular non-lawyers who are involved in providing legal services is to switch to an entity regulation model.

Non-Lawyer Ownership

With few notable exceptions, non-lawyers cannot own an interest in a law firm or receive legal fees. What this means as a practical matter is that the people who own law firms generally don’t have much experience in business leadership, management, human resources, customer services, or other skills you would expect to find in the C-suite.

At the same time, many suspect the reason legal services are so expensive and inefficient is that nobody involved in providing those services knows much about anything other than lawyering. (It is probably no coincidence that ethics rules involving business skills like communication and bookkeeping are among the most common reasons lawyers get into trouble.)

On the other hand, many lawyers object that lawyers have higher obligations to their client than a typical business does to its customers, and fear that allowing non-lawyers to own a law firm places the client at risk. Others point out that a law license is hardly a guarantee of competence or good service.

Several countries, including the UK, Australia, and Canada, are experimenting with non-lawyer ownership, and some US states have begun to do the same. (Although in a few jurisdictions like Washington, DC, non-lawyer ownership has actually been permitted for quite a while.)

In 2020, Arizona became the first state to entirely eliminate its rule prohibiting non-lawyer ownership and fee-sharing with non-lawyers (Rule 5.4 of the Model Rules of Professional Conduct).

State-by-State Licensing

Published on January 6th, 2022, by Sam Glover.