Bar associations weigh in on US ABS debate

by Samantha Woodhill20 May 2016
The American Bar Association has established a Commission on the Future of Legal Services, looking into the alternative business structure debate in the legal sector.

Resistance remains fierce.

“There can be no doubt that the public interest and integrity of the profession is best served when lawyers are owners of firms,” the New Jersey Bar Association president Miles S. Winder wrote.

But the ABA is leading the effort to improve the delivery of access to legal services in the US, stating the commission aims to seek comment from both the profession and the public and establish working groups to assess developments and propose new approaches, outside of the traditional model.

Currently, only two jurisdictions permit forms of ABS in the United States.  Washington state and the District of Columbia allow an ABS structure, provided all persons with financial or managerial authority abide by the Bar’s professional conduct rules and that lawyers are responsible for the non-lawyers at the firm.

Very few ABS structured law firms exist in D.C., despite the fact an alternative structure is permitted in the district.  The New York state bar indicated that a possible reason for the low uptake is that “an attorney who is dual-licensed in DC and another jurisdiction may be concerned that the formation of or participation in an ABS in DC will constitute a violation of the Rules of Professional Conduct in the other jurisdiction in which the attorney is also licensed.” 

Rules in New York prevent a lawyer primarily practising there from joining a firm that includes a non-lawyer partner.  Despite this, the New York Bar Association’s current president, David P. Miranda, said the organisation remains open to the idea, but wants more proof on the potential upside, the Wall Street Journal reported.

“[The] burden of proof must remain on propoents of [Alternative Business Structures] to show that non-lawyer ownership, which the ABA has repeatedly said is antithetical to core values and professional independence, is necessary to achieve wider access to justice, and that ABS both helps the public and protects it,” Miranda wrote.

The American Bar Association said limited growth opportunity might also be a reason for the slow uptake of the ABS model, given that only two jurisdictions allow it.

Access to justice; enhanced financial and operational flexibility; and increased cost-effectiveness and quality of services, are all noted by the American Bar Association as potential benefits of allowing ABS. 

But the risks out-weigh the benefits for many state bar associations, citing allowing the structure may be a threat to lawyers’ core values, that it may decrease pro bono work as firms look to maximise return on investment, it may be a threat to attorney-client privilege (as non-lawyers may have access to sensitive information) and it may fail to deliver the identified benefits.

All jurisdictions in Australia, England, Wales and Singapore, allow full ABS in the legal industry.  Some European countries also allow ABS but on a more limited scale: Scotland allows 49% non-lawyer ownership, Italy allows 33%, Spain 25% and Denmark 10%.  New Zealand permits non-lawyer owners if they are relatives of actively involved lawyers and are only permitted to own non-voting shares.
 

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