The Rise of Re-Regulation in the Legal Industry

Episode Notes

Transcript

[Music]

Intro: Welcome to The Digital Edge with Sharon Nelson and Jim Calloway, your hosts, both Legal Technologists, authors, and lecturers, invite industry professionals to discuss a new topic related to lawyers and technology. You’re listening to the Legal Talk Network.

Sharon Nelson: Welcome to the 163rd Edition of The Digital Edge Lawyers and Technology. We’re glad to have you with us. I’m Sharon Nelson; President of Sensei Enterprises; an information technology, cybersecurity and digital forensics firm in Fairfax, Virginia.

Jim Calloway: And I’m Jim Calloway; Director of the Oklahoma Bar Association’s Management Assistance Program. Today, our topic is The Rise of Re-Regulation in the Legal Industry.

Sharon Nelson: But first, we’d like to thank our sponsors. We would like to thank our sponsor, Nota powered by M&T Bank. Nota is banking built for lawyers and provide smart no-cost, IOLTA account management. Visit trustnota.com/legal to learn more. Terms and conditions may apply. We would like to thank Alert Communications for sponsoring this episode. If any law firm is looking for a call intake or retainer services available 24/7, 365; just call (866) 827-5568.

Jim Calloway: We’d also like to thank our sponsor, the Black Letter Podcast, a show dedicated to making law exciting and fun with informative interviews and advice from esteemed guests. We’d also like to thank Scorpion.  Scorpion is the leading provider of Marketing Solutions for the legal industry with nearly 20 years of experience serving attorneys. Scorpion can help you grow your practice. Learn more at scorpionlegal.com. Our guest today is Jordan Furlong who’s an internationally renowned legal sector analysis, author, speaker, and consultant deeply invested in a better future for the legal profession and the society it serves.

Over the past 20 years, Jordan has forecast critical new developments and discerned emerging patterns in the legal ecosystem and has addressed thousands of lawyers in dozens of audiences across four continents about the rapidly evolving legal services market. Based in Ottawa, Canada; Jordan is currently focused on serving clients in the areas of lawyer formation, education and licensing, and the legal services regulation. Thanks for joining us today, Jordan.

Jordan Furlong: Thank you very much Jim and Sharon, it’s fantastic to be back here again.

Sharon Nelson: Well, we’re very happy that you’re here discussing The Rise of Re-Regulation in the Legal Industry. So, tell me Jordan; what does re-regulation even mean? Is this the same thing as deregulation like we saw in the airlines with other industries?

Jordan Furlong: Oh, yeah. No, for sure. Re-regulation is a completely different beast, Sharon. Deregulation is, from my point of view, it’s about taking away all or most regulatory oversight and guardrails in a sector or an industry and letting the market, you know, do as it will. Which has of course, been highly problematic in many industries and would just be a disaster in law. Re-regulation, from my point of view is about reforming regulation. It’s about getting it right, you know?

Getting back to basics and saying, “Look, what are our goals here? What are our priorities and purposes? Why are we doing all this?” and then saying, “Okay, does our current regulatory structure align with these priorities and drive us toward these goals? And if not, how do we fix that?” Now, the way I look at it, our current regulatory goals are, or certainly ought to be; to protect the public interest in legal services delivery and to give people meaningful, affordable access to justice. So, from way I look at it, re-regulation is about restructuring the regulation of legal services so that it achieves these ends.

Jim Calloway: A term we keep hearing a lot these days is sandboxes; in other states you have them or talking about setting them up; what’s the legal regulation sandbox, and what are these supposed to accomplish?

Sharon Nelson: Yeah. A sandbox in the legal regulatory — and not just legal, other industries have them as well. Sandbox is essentially a supervised laboratory for non-traditional legal services delivery. And I kind wished we started with laboratory as our word here; rather than like sandbox or playground which, you know, has all sorts of not great implications, but, you know, here we are.

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And I think laboratory is better because all of these entities that we’re talking about within the sandbox confines, they are really, they’re supervised experiments in legal services, provision, right? In a regulatory sandbox, a person who isn’t a lawyer or an entity that’s not a law firm can provide legal services in a jurisdiction even if the overall regulatory scheme forbids that type of service or provider. And the point of doing this is to measure in a controlled context the mix of risk and reward that is found by providing these services in this particular context. And if the reward exceeds the risk, then the provider should be approved.

It’s pretty simple actually and it’s really — it’s already what we do with lawyers anyway, it’s the same basic process. And this is why I think the idea of a laboratory is a good analogy for us to use because when you look at how these sandboxes operate, they bring in these experimental providers of legal services. People who aren’t lawyers and companies and entities that aren’t law firms. They allow them to do their thing, to deliver their services. They observe the interactions between these providers and their clients and customers. They collect data, right?

They very carefully control the conditions so that the experiment, you know, doesn’t get out of hand or catch fire or do damage to everybody. And at the end of the process, when there’s enough data has been collected and analyzed, then we can make an evidence-based decision as to whether to reject or approve this new approach. That’s fundamentally all it really is. And when you think about it in those terms, assessing the risk and figuring out what is the reward that can be delivered in exchange for this risk, then it starts to make a bit more sense as a way in which we can meaningfully address a lot of the access to justice issues that are driving the development of these sandboxes.

Sharon Nelson: Well sandbox certainly seem to be what both states have decided to do, but there’s one state that has bypassed sandboxes altogether and just gone straight into the radical reform of legal regulation. Tell us what’s happening in Arizona and why you think it’s happening Jordan.

Jordan Furlong: Arizona’s really cool, what they’re doing there. I mean, you know. And it’s not the first time, of course. Arizona has been a pioneer in innovation in legal services regulation obviously, lawyer advertising going back to – oh gosh, 70s, 80s, I forgotten when. The ban against lawyers being able to advertise their services first fell, thanks to challenge in Arizona. So, Arizona looked at the sandbox approach, which at that point had been adopted by Utah and was being looked at by a few other jurisdictions as well. And they said, “You know what, it’s got its merits, we kind of like what they’re doing, but this is kind of a slower road to progress than we would like, right? We think we can go a little bit faster than this.”

So, they actually took a page from England and Wales which years ago authorized the development of what they call Alternative Business Structures or ABSs for legal services. And an ABS in the English and Welsh context and it is largely, pretty much I think almost entirely the same in the Arizona context is one in which you don’t need to restrict the ownership of the law firm or the legal services entity solely to lawyers. You don’t have to restrict the sharing of fees and profits solely to lawyers.

You can let people who aren’t lawyers, imagine that, actually take a role in owning and operating and working the business. And so, effectively, of course, this means setting aside Rule 5.4 Of the Rules of Professional Conduct which obviously is part of the ABA rules which pretty much every state has more or less copied and pasted into its own ethical and regulatory system. And Arizona looked at 5.4 and more or less decided based on evidence, which had been provided to a task force. Look, 5.4 Isn’t really about protecting the public or about ensuring that people can access services and people get the best legal services they can, it’s fundamentally a protectionist measure, and it’s meant to keep non-lawyers out of legal services provision.

So, Arizona now has a system whereby you can apply for and receive an ABS license. They have, so far, already approved; this is like, I guess, what it’s August now? It’s almost like a year old. They’ve already approved three entities, essentially multidisciplinary partnerships and professional firms and there were several more in the pipeline awaiting approval, including, by, the way, LegalZoom has just recently applied to get an ABS license in Arizona, which I think is an absolutely fascinating and really important development, and I should note in passing one of LegalZoom’s top – I guess, we can call them competitors, although I think they’re all kind of set in the same direction, Rocket Lawyer is also one of the approved members of Utah’s sandbox. So, we are seeing some of the pioneering in the most well developed and best backed alternative legal services providers if you will in this space taking advantage of these new experimental approaches in Arizona and Utah.

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Jim Calloway: Jordan, Arizona also seems to be part of a nationwide push to license paraprofessionals. We’ve seen the limited license legal technicians be born, live and die in Washington State; so, what’s this about and what’s it supposed to accomplish?

Jordan Furlong: It’s actually really interesting Jim, because paraprofessional regulation, you’re right. At least in the United States does trace its origins most recently back to that late and lamented LLLTs in Washington. And for those who aren’t familiar, the Limited License Legal Technician was someone who was not a lawyer, but who was a trained professional who would work especially in the area of family law for people who can’t afford a lawyer, didn’t want to use a lawyer, could provide some basic legal services. And in theory, that was great.

And the development in the authorization of LLLTs was a significant milestone in the long-standing process of regulatory reform in the U.S. Problem was that the scope of practice for LLLTs was very circumscribed, the costs of acquiring a license were monumental and as someone to no one said “If you are trying to inspire as little confidence as possible among members of the public in your particular provider, you could not choose a better name than Limited Licensed Legal Technician”, right? So, in a way, you know, I don’t want to say it wasn’t set up to lose, but it was so strongly circumscribed.

Only a few dozen were ever approved over the course of years. And as you as you mentioned, the Supreme Court shut the program down last year. However, happily, from my point of view, we have seen recently a wave of authorization of paralegals and paraprofessionals in the US and not to go down into great detail, but Utah created a License Paralegal Practitioner Program around the same time at launch of sandbox system. Minnesota is getting ready to move ahead with legal, paraprofessionals. New York State actually was one of the pioneers in this area.

They developed a program called the Court Navigators Program to help people — I think especially those in like eviction or landlord-tenant cases to help them make their way through the court system and New York’s out there now talking about licensing social workers to provide some basic legal tasks. And Arizona has done something even more interesting. Arizona has developed or is in the process of developing a paraprofessional program which yes, absolutely, it still can be a kind of a public-facing direct consumer provider, but they also can very much work with in law firms and in legal organizations to provide the kind of services that might otherwise be provided by like a clerk or secretary, or even a junior lawyer but can do so and I think a much more cost-effective fashion, they are specifically trained and equipped to work with technology and business process improvement.

And the reason I think we’re seeing this wave of paraprofessional authorization is pretty much the same as for the sandbox and it’s the same for the ABS in Arizona; is that in these states, the regulators, and this can be a mix of the Supreme Court, and the State Bar and other stakeholders in the area, they have concluded what should be very clear to all of us is that the legal profession is interested in serving only an extremely small portion of the entire population of people and businesses and entities that need legal services help, right? We’ve seen survey after survey that suggests that only maybe 15, 18% of all legal problems and issues ever find their way to a lawyer.

Everybody else is out there doing it on their own or getting friends or family to help them with that or just not dealing with it at all. And there is a widespread I think recognition and it’s very gratifying to me to see this at the regulatory level and at the court level to say the legal profession is not going to solve this problem. We have given the legal profession decades of opportunity in order for them to say, “Yes, we will find ways to serve everybody, even those who would not otherwise afford our services hasn’t happened, not going to happen, so we’re going to bring other suppliers in; we’re going to try to find a supply-side solution to this problem.”

There is demand side issues as well, which we’d happily talk about later on too, but this is fundamentally what it’s about. It is about realizing that the market has needs well beyond what the legal profession is either able or willing to meet and therefore, we need other providers and other solutions and other options to meet those needs.

Jim Calloway: Send your feedback to Jordan Furlong.

[Laughter]

Jordan Furlong: Please do.

Jim Calloway: But before we move on to our next segment, let’s take a quick commercial break.

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Sharon Nelson: Welcome back to The Digital Edge on the Legal Talk Network. Today, our subject is The Rise of Re-Regulation in the industry. Our guest today is Jordan Furlong. Jordan, you’ve written about some important things happening outside the U.S. when it comes to legal re-regulation. Tell us what’s going on in the UK.

Jordan Furlong: Well, you know, Sharon it’s funny, right? Because some Montebello just talked about it already in this segment. Probably has a number of lawyers in the U.S. pretty hot under the collar in terms of “Well, this is outrageous, I can’t believe this is being done.” But you compare that to what you’re seeing elsewhere and England and Whales is a great example.

The legal services regulator there is talking these days with increasing frequency and I think in all seriousness, about the need for lawyers to undergo periodic requalification, right? That is your law license would no longer be considered effectively permanent and irrevocable, other than in cases of malpractice or malfeasance. But instead, you would have to demonstrate in some fashion that you are still fully competent and proficient in the practice of law to justify your continued licensure. I mean, can you imagine?

Sharon Nelson: No.

Jordan Furlong: Think about their reaction, right? Think about their reaction of most lawyers you know, if they were told after 5 or 10 or 15 years in practice, “Hey, you need to undergo a reassessment process in order to retain your license”, right? But you know what? The Brits are talking about it, I think they’re serious about it, and you know what?

The experience as any guide, the innovations that began on that side of the Atlantic, inevitably their way over to this side. So, when you hear about paraprofessionals and sandboxes, I think you need to appreciate this is just the leading edge of a potentially radical revolutionary wave.

Jim Calloway: We’ll next move on to another controversial topic. It seems nobody who’s taken the bar exam test these days is happy about it. I understand New York has announced its going to be December before they have their results. But does the bar exam still at work? And if not, what could possibly replace it?

Jordan Furlong: Well, you know Jim, the question of whether the bar exam still works depends on what purpose it’s supposed to serve. I mean, the point of the bar exam is to create an artificial barrier for entry into the profession. One that is structured specifically to ensure the continued dominance of white and male individuals from affluent backgrounds to the legal profession, then yeah; it’s doing a fantastic job, well done, right?

And there are extensive studies out there demonstrating the clear exclusionary, if not straightforwardly racist origins and functions for the bar exam. So, we need to take with a large grain of salt any claim that the bar exam exists solely to ensure the competence of new lawyers. Because in addition to being as exclusionary as it is, the bar exam also fails to do what it says that it does, to assess competence, right? The bar exam, essentially repeats the law school experience, it just compresses three years of learning into this highly pressurized, short period of time, it doesn’t tell us anything new about the person who’s applying to become a lawyer, doesn’t tell us anything about how effective a lawyer they’d be in practice; and if you want to know about how horrible the bar examination process has been over the last year, go on to Twitter and look for a hashtag #barpocalypse and you will find stories that will raise the hair the back of your neck or it should.

The deeply disturbing extensive accounts of frankly, trauma, that bar applicants, especially women have gone through over the course of the last year. So, I do want to say that there is a reform movement underway with regard to bar admission. In fairness, the National Committee of Bar Examiners has released a report talking about creating a better bar exam. There’s a great organization that I serve on the Advisory Board called The Institute for the Advancement of the American Legal Profession. They released a report last year called Building a Better Bar and that takes a close look at the core competencies of lawyering and how could we design a new way of doing it. But here’s what’s most interesting to me.

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Oregon right now and potentially even New York State are looking at ways in which set aside entirely reforming the bar exam itself, they’re talking about opening up new pathways to licensure. So that instead of taking the bar exam, you could, as a for instance, take extensive clinical experience courses in law school and that will qualify you, or you could undertake extensive degrees of supervised practice with a practicing lawyer after graduation but before being called to the bar.

Not the similar by the way, to the articling system we have here in Canada. And what I like about these two approaches is that not only should they be considered at least equivalent to the bar exam; I think they’re superior because they actually measure and assess how good you are in practice with legal issues, in practical real-world context with actual clients. So, I’m really excited about what this portends for the possibility of reform in lawyer licensing and frankly, lawyer formation across the board. I think it’s really neat what could happen here.

Sharon Nelson: I just Like that barpocalypse; that’s pretty good. So, let’s look ahead and see where this is going to take us. Project out 5, 10 or 20 years whatever you want to, what will be the state of legal services regulation and lawyer regulation, which is you’ve said is not the same thing.

Jordan Furlong: Wow, and I should probably know better than to think predictions after being in this game as long as I have. I think what we can safely say is that in five years’ time, we will have seen at least several more U.S. states undergoing re-regulation of their regimes for the regulation of legal services delivery and the ongoing competence of the lawyers. So, I think we may see some more states create sandboxes, although I think in five years’ time, we’ll probably have number one, a couple of more states that have gone the ABS route like Arizona and if we get to that point, then — and here’s the thing, the more Arizonas we have, the more ABS jurisdictions we have, the less likely it is that sandboxes will be set up because a sandbox is essentially kind of a short-term, middle way; it’s a moderate approach.

“Oh, it’s a pilot project, let’s figure it out, let’s take your time.” But if we have enough jurisdictions, that have said “No, listen, we’re just going to go straight to the ABS system”, then I think those will start to catch on. And I think we will probably see that become far more common in a space about five years’ time. What I will say about 20 years from now, I think we’re going to look back and wonder how did we ever do it the way we did for so long? You know, in terms of regulating legal services, licensing lawyers and regulating them knowing how many problems were with this system, but just not wanting to admit them to ourselves. So, in 20 years’ time, I am both hopeful and optimistic that we will have been in the new normal for so long, it’ll just be normal, we will just take it for granted, this is the way it’s supposed to be.

Sharon Nelson: Let’s hope you’re right.

Jim Calloway: Well, Jordan, I’ve spent a lot of my time involved with access to justice issues, and it’s certainly critical. But every lawyer listening to his podcast has to be saying now, “Wait a minute, your licensing new competitors for me during a pandemic? That’s kind of crazy.” Do you appreciate their concerns?

Jordan Furlong: I can appreciate their concerns because obviously, anybody who’s trying to make a living in these extremely challenging times, has to be listened to with care and attention. But I think that anybody who would be opposed to these kind of regulated reform efforts need to look at in a couple of ways. The first thing is this; and I’ve mentioned it earlier, the entire reason why this new provider should be licensed is to serve this vast population of people and businesses that aren’t hiring lawyers, right?

And that lawyers – again, to make this point, are not going to serve, right? I don’t think you could find a lawyer anywhere in the United States who charges less than effectively; I shouldn’t say you couldn’t find intrigued; but you find only a bare handful of lawyers who charge what? $100.00 per hour as an hourly rate or less, right? And you’ve got stats out there that prove a significant percentage of Americans and Canadians aren’t any in a better position, they couldn’t even cobble together $500.00 in an emergency.

So, asking them to pay hundreds of dollars in a single hour, to a lawyer? That’s not just a unrealistic, it’s insulting, right? So, when you look at these new providers coming in, they are there to serve the great majority of people or organizations that lawyers have shown no interest in helping out, right? This isn’t the matter of competition because lawyers aren’t serving the people whom these alternative providers are there to help.

That’s the bottom line. And the second point I want to make and it particularly is appropriate to Arizona’s Paraprofessional Program; is this. And Justice Ann Timmer in Arizona made this point. I think it was an interview with Bob Ambrogi. She said, “Look, lawyers shouldn’t be worried about competing with these new providers, they should be hiring them. They should bring them into their firms. These are trained professionals. They are savvy, they are adept with new technology and business process.

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They could be more productive for you than anybody right now that you have on staff in nearly as much of a cost-effective system.” We are long past the point where law firms can keep on doing their work in his kind of linear, sequential, reinventing the wheel fashion, right? I just don’t think it’s feasible for you to try to be profitable as a law firm without employing some degree of text, some degree of process improvement.

And what these new types of paraprofessionals offer in addition to solutions for people who can’t afford lawyers is another option for lawyers and law firms to do their work, serve their clients, and turn a profit. So those are two reasons I think that your everyday average lawyer should be in support of these kinds of approaches.

Jim Calloway: Before we move on to our next segment; let’s take a quick commercial break.

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Sharon Nelson: Welcome back to The Digital Edge on the Legal Talk Network. Today, our subject is The Rise of Re-Regulation in the Legal Industry and our guest is Jordan Furlong; an internationally renowned legal sector analyst, author, speaker, and consultant deeply invested in a better future for the legal profession and the society it serves. Jim, I think we’re about out of time, but I know you have one burning question you would like to ask.

Jim Calloway: Well, why should working lawyers care about any of this? Shouldn’t their focus be on doing their work, finding, billing their clients, billing hours, making money, what does regulation reform have to do with them anyway?

Jordan Furlong: Well, Jim, absolutely. I mean, if you’re a working lawyer, yes. You do have to be concerned with all of these things and the smaller the practice you’re in, you also have to you know, think about running your business and marketing and all these things. But, fundamentally, i think if you’re a lawyer who truly doesn’t care about anything other than making as much money as they can, you know?

And believe me, I have come across not very many I’m happy to say, but I’ll come across a few lawyers of that type in all types and sizes of firm. Yeah, none of this talk of reform should interest you; you should feel free to oppose it if you want. But I think you’ve completely missed the point of being a lawyer, right? We are professionals. And among other things, that means we serve the public good and we advance the public interest as I’m fond of saying, a law firm is not a pizza parlor and it’s not a hair salon.

It’s a vitally important conduit for people to exercise their rights in a liberal democracy. And the legal profession has been given a number of powers and benefits that are conditioned, I think, upon our accepting that responsibility and role in our society. And so, re-regulation to my mind is at least in part about the legal profession, trying to refocus upon and reclaim that sense of professionalism and social duty that I think we’ve kind of lost over the last couple of decades in particular. I think what should really make lawyers enthused and charged up is creating the best kind of regulatory structure that will maximize the effectiveness of lawyers and all legal services providers while simultaneously reducing the risk they represent especially to the most vulnerable client populations out there and allowing us to be the best lawyers we can be.

And for people and business to get the best kind of legal services they can and fundamentally, to let people obtain the maximum legal remedies and solutions that our legal system promises. That, to my mind should be our professional focus and that’s why I think re-regulation regulatory reform matters or ought to matter to every lawyer.

Sharon Nelson: Well, thank you for joining us today, Jordan. I know we all have a hard time seeing the future of the legal profession and there’s been a lot of missteps along the way and I too, regret the absence of servant leadership. I Wish that the practice of law were not based so much on money; but it simply is.

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But just exploring everything that you’ve talked about today, has been I’m sure of enormous help to our listeners. So, thank you again for joining us.

Jordan Furlong: Thank you, Sharon and Jim both, take care.

Sharon Nelson: And that does it for this edition of The Digital Edge, lawyers and technology. And remember, you can subscribe to all of the editions of this podcast at legaltalknetwork.com or on Apple Podcasts. And if you enjoyed our podcast, please rate us in Apple Podcasts.

Jim Calloway: Thanks for joining us. Good bye Ms. Sharon.

Sharon Nelson: Happy trails, cowboy.

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Podcast transcription by Tech-Synergy.com