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Last Post 02 Oct 2020 05:13 PM by Jennifer Albright
ACJA 7-209 Alternative Business Structures
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Posts:6 New Member

03 Mar 2020 02:41 PM
    The Final Proposed ACJA 7-209 document was posted October 6, 2020 (see "Proposed ACJA 7-209Final for AJC 10.06.20" below). This version reflects changes that were made based on comments to this forum and input from the State Bar of Arizona and the Clerk of the Supreme Court. This is the version that will be presented to the Arizona Judicial Council (AJC) on October 22, 2020, for consideration for adoption, effective January 1, 2021 and to align with the effective date of related rule changes that were adopted by the Supreme Court in its August Order for Rule Petition R-20-0034.

    The Third Amended Proposed 7-209 was filed SEPTEMBER 22, 2020, in response to the Supreme Court's Order adopted the proposed rule amendments allowing the creation of a program to license Alternative Business Structures (ABS). This filing includes details on the fee schedule for the licensing process. COMMENTS WILL BE ACCEPTED THROUGH OCTOBER 5, 2020.

    This proposal was modified on JUNE 22, 2020 to align proposed draft 7-209 with the Final Amended Petition filed in R-20-0034. The Second Amended Draft 7-209 filed this date reflects changes made not only to align with R-20-0034 but also reflects input from various commenters here and in the Supreme Court Rules Forum.

    This proposal was modified on April 27 to align proposed draft 7-209 with additional amendments to R-20-0034 and comments to that rule petition as well as to this proposal regarding the regulation of Alternative Business Structures received through the first comment period.

    This proposal was amended on 3-5-2019 to correct various typographical errors in the draft code section.

    This proposal creates a new ACJA section that sets forth regulatory requirements for the administration of the licensure of Alternative Business Structures (ABS). The proposal includes requirements for licensing (initial and renewal), roles and responsibilities of an ABS and its compliance lawyers, and discipline sanctions for misconduct by an ABS or its members. This section also includes codes of conduct for an ABS and its non-lawyer members.

    This proposal should be read in conjunction with Rule Petition R-20-0034: https://www.azcourts.gov/Rules-Forum/aff/123 located on the Supreme Court Rules Forum web page.

    Comment Deadline: Initial Comment deadline is March 30, 2020, with an amended proposal, if any, to be filed by the AOC by April 27, and a final comment period concluding on May 26, 2020 with final amended proposal, if any to be filed by AOC by June 22.

    For more information, contact Suzanne Porter, [email protected]

    New Member
    Posts:1 New Member

    06 Mar 2020 08:23 AM
    I'm a practicing Arizona lawyer and I believe this is a good idea. Lawyers are notoriously bad at running businesses and this will allow for non-lawyers with business backgrounds to help run the business and get compensated by equity rather than cash. It will also increase the access to legal services by helping newer lawyers form law firms more easily.
    The concern of sharing legal fees with non-lawyers is no more relevant here than it is if a law firm borrow money from a bank or hires a marketing agency. Obviously legal fees are being used to pay for those services as well. But allowing non-lawyers to have equity (just like borrowing money from a bank) is nothing like ambulance chasing. Also, as long as lawyers remain in control of the professional decisions and confidentiality is maintained, there should be no problem.
    What is proposed is already done with dental practices and there have been no issues regarding quality of dental care here in Arizona as a result.
    New Member
    Posts:6 New Member

    27 Apr 2020 09:15 PM
    By Jennifer Albright
    Staff to Task Force on Delivery of Legal Services and Entity Regulation Workgroup

    Summary of April 27, 2020, amendments to proposed ACJA § 7-209.

    Rule petition R-20-0034 contains proposed changes to Arizona Rules of Supreme Court that are the basis for the proposal to establish ACJA 7-209. On April 27, a Response and Amended Petition was filed in R-20-0034. An amended proposal for ACJA 7-209 was to align the proposal with changes to R-20-0034 and comments to both that rule petition of comments to this proposal. The following summarizes the amendments made:

    First, amendments were made to ACJA § 7-209(D)(5) and (E) to align with the amendments to Rule 33.1 as proposed in R-20-0034. Those edits include a transfer of content from ACJA § 7-209(I) to ACJA § 7-209(D)(5)(d). This consolidates all content related to the roles and responsibilities of the Committee on Alternative Business Structures into a single section of ACJA § 7-209.

    Second, the procedures and requirements for reinstatement of an ABS license after revocation or suspension was moved from ACJA § 7-209(E)(8) to ACJA § 7-209(I). Initial licensure and renewal of a license involves similar requirements and processes. Reinstatement, just like for lawyers seeking reinstatement to the practice of law, is a different process from initial licensure and renewal. Therefore, having the procedures and requirements of reinstatement in a single dedicated section that followed the section on discipline was more logical and makes navigation of the regulation easier.

    In addition, changes have been made to the process of reinstatement. As originally proposed reinstatement investigations and approval would be carried out by the Certification and Licensing Division of the Administrative Office of Courts and the Committee on Alternative Business Structures. After further consideration and review, it was determined that the reinstatement process should proceed like that for lawyers. The proposed rule changes and ACJA § 7-209 place the duty of investigating complaints against an ABS and both its lawyer and nonlawyer members on the State Bar with formal actions proceeding before the Office of the Presiding Disciplinary Judge in the same manner as lawyer discipline. Because it handles lawyer reinstatement proceedings, the State Bar will be best positioned to handle ABS reinstatement proceedings. Therefore, amendments to ACJA § 7-209(I) (formerly ACJA § 7-209(E)(8)) align the reinstatement process with that of reinstatement for lawyers.

    A third amendment adds an explicit statement to ACJA § 7-209(E)(2)(d)(2) that the Committee on Alternative Business Structures must recommend denying licensure if any member of an ABS was disbarred from or denied admission to the practice of law in any jurisdiction, domestic or foreign. The Legal Services Task Force unanimously recommended that disbarred lawyers should be prohibited from owning all or a part of an ABS because of the possibility that they could circumvent the law. In addition, many lawyers’ comments to R-20-0034 expressed concern that the proposed rule language was not explicit enough to exclude disbarred lawyers. Therefore, this amendment explicitly prohibits disbarred lawyers as economic interest holders of an ABS.

    Finally, several grammatical and formatting changes were made throughout the section.
    New Member
    Posts:1 New Member

    28 Apr 2020 05:30 PM
    >>> There Are Many Legal Business Advisors, who Help Attorneys to Innovate <<<

    There are already many advisors who are helping attorneys to innovate. I just finished reading Lawyer Forward by Michael Whelan and will attend a boot camp next week with the express purpose of improving operations and marketing.There are many coaches who help attorneys to innovate and we are innovating.

    I'm also have a friend, who uses AI to offer the service of electronic filing and then service of law suits.

    Clio has a yearly conference geared to helping lawyers use innovation.

    I belong to other organizations, which are making presentations to help attorneys operate more efficiently.

    >>> The legal system which you perpetuate is one of the problems. It isn't the ownership. <<<

    You court rules make it impossibly expensive for lawyers to handle smaller cases. For a claim in Justice Court, I have to file a complaint, have it served, prepare a disclosure statement and bring that disclosure statement to a settlement conference, which I have to take my time to prepare my client and I have to attend the settlement conference. This work takes a minimum of 10 hours and the case is going to be settled for less than the total owed. I handle cases contingent, but I didn't make enough to handle these cases and didn't earn enough to pay myself. If I handle a case for $5,000.00, and my fee is 20%, the case will be settled for $3,000 or less and my fee will be $600.00. If my hourly rate is $250.00 per hour, I will have performed $2,500.00 or work but will only receive $600.00 in fees. I didn't earn enough money to pay my staff, let alone pay me. No innovation can change those numbers.

    You created procedures so cases settle, but those procedures aren't cheap. They are more expensive for the parties and for the attorneys.

    I use forms but still have to read the documents and check the numbers in order to prepare a disclosure statement and either I or my staff must type it.

    >>> The First Innovation Will Be to Ignore the Ethics Rules <<<

    Until you know how innovation is going to offer more legal services at cheaper prices to consumers, the Arizona Supreme Court is making a fools bargain. The only way innovation can make legal services available to consumers at a cheaper price is by breaking the rules of ethics and ignoring the legal rules the legislature and the Arizona Supreme Court have enacted.

    >>> You should consider how Laws and Court Rules interfering with providing value. <<<

    Mike Whelan suggested that if an attorney set up a flat fee for a divorce case for all the work pretrial, there would be an incentive to settle the case early with the least amount of pain for the clients. Ethics attorneys asked whether money was being returned because the fee wasn't based on the hours worked. The attorney innovated and created forms and procedures and processes to encourage the parties to resolve problems.

    The flat fee for all work before trial is effective and provides value for the client.

    >>> As long as you, insist that attorneys must bill based on a quasi hourly system, you are encouraging waste and inefficiency <<<

    Do you know how many cases we went to multiple settlement conference so one of the attorneys could run up the bill? I remember one case in particular where we had five settlement conferences. The case settled for an amount my client was ready to accept at the first conference. Opposing counsel said the case settled for the amount he thought it should settle for. I don't have proof, but in my opinion, the only reason for more than one settlement conference was for the attorney working hourly to churn his bill.

    >>> Some People Will Complain No Matter What We Do to Make Things Easier for Them <<<

    People complain about plumbers bills, but they have to learn their craft and they have to earn a living. Many earn more than many attorneys earn. Did you consider that the legal system itself is what causes consumers to complain about attorneys.

    >>> Compliance with Laws and Procedures is Expensive and Attorneys Must Pay for Compliance through Fees <<<

    How much do you believe it costs for attorneys to comply with all the laws and court procedures? I'm a collection attorney and I have to comply with the Arizona Collection Agency laws and if I accept a retail collection case I must comply with the Fair Debt Collection Practices Act in addition to all the other laws and regulations. I work as efficiently as I can and my clients get good value. Working contingent to collect debts, which may be uncollectable, I share the risk with my client, that neither of us will be paid. This isn't like accident attorneys who will be paid by an insurance company. We are frequently not paid.

    >>> Conclusion <<<

    In California, the collection agency law expired and collection agencies hired attorneys, who have lost their independence.

    There are lots of attorneys who are providing services at a reasonable rate and you allow licensed document preparers. Arizona has successfully addressed this problem.

    If you wish to make the legal system more affordable, change the laws and procedures, but that will mean the legal system will be less fair.

    Please do not allow Arizona to be the experiment, which allows non-attorneys to control attorneys, just so we can be first.

    My experiences for 40 years as a licensed attorney tells me this is a totally bad idea.

    11 Aug 2020 03:57 PM

    My Name is David DeGroote I built a law firm from the bottom up with my wife the Attorney Belen Olmedo Guerra. The firm Is Belen Law Firm, PLLC. Me being the only one with the business experience, advertising and marketing expertise I was tasked to do everything from incorporating to website, phones, intake, collection, and on.. Belen had zero ability to conduct any sort of organizational tasks that were not related defending against criminal charges with zero business experience or knowledge.. I left my job at the bank making good money when she was fired from her job so we could start this firm with her, we sold our dream home and used the money to fund this new firm.. I was promised by Belen that if we did this and built our company together we would retire together and we would always be 50/50 partners.. But then after we got the firm in a place where its making in excess of a million dollars a year in only 11 months, she was able to kick me to the street, change the locks and block me out.. It has been about 5 months now and she has left me penniless living off credit cards, she was able to do this because she is the attorney and with this stupid and unethical law that only and attorney can own the company I am out on my own with nothing in the middle of a pandemic trying to get just any job where 100s of people are applying at the same time... This is not how a good person or an ethical attorney would behave or treat the father or mother of their child and business partner/investor/Husband but it is an example of what undue power to harm and victimize a contributing family member is given by allowing an attorney or any business partner to be able to use this law to steal the half of a company that belongs to someone else.. PLEASE REFORM THIS LAW OR GET RID OF IT!

    Thank you
    David DeGroote
    11 Aug 2020 04:18 PM

    First.. a business is a business, a law practice is just another business.. There is nothing that warrants any such special treatment. Practicing law is nothing more than a service, similar to washing windows or mowing lawns.. Being ethical is expected One can be punished for ethics violations and or sued, there are already remedies..

    The experience of 40 years is evident.. Try to grasp the now and the future.. Everything has changed, 40 years ago it was a different world.. Step out of the way of progression..

    Abolish this law!

    It harms people and business.. It prevents the little guy trying to get their law practice up and going with proper financing or from aligning themselves with partners who bring skills.. The reason some of these fat cat old timers don’t want to see this go away is because they don’t want to compete with or let new guys in..

    Thank you
    David DeGroote
    New Member
    Posts:6 New Member

    02 Oct 2020 05:13 PM
    Please find below proposed amendments to the definition of "Alternative Business Structure" and "Economic interest" as defined in proposed ACJA 7-209. These proposed amendments to the definitions are submitted by: May Lu, Esq.; John Hay, Esq.; James O’Sullivan, Esq.; James Reynolds, Esq.; and Lynda Shely, Esq.

    Arizona Code of Judicial Administration
    Part 7: Administrative Office of the Courts
    Chapter 2: Certification and Licensing Programs
    Section 7-209: Alternative Business Structures

    A. Definitions.

    “Alternative business structure” (“ABS”) is a business entity that includes nonlawyers who have an economic interest or decision-making authority in the firm and provides legal services in accord with Supreme Court Rules 31 and 31.1(c).

    “Economic interest” means (1) a share of a corporation’s stock, a capital or profits interest in a partnership or limited liability company, or a similar ownership interest in any other form of entity, or (2) a right to receive payments for providing to or on behalf of the entity management services, property, or the use of property (including software and other intangible personal property) that is based, in whole or in part, on the firm’s gross revenue or profits or any portion thereof. Notwithstanding the foregoing, “economic interest” does not mean employment-based compensation pursuant to a plan qualified under the Internal Revenue Code of 1986, as hereafter may be amended, or any successor rule, or discretionary bonuses paid to employees.
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