Thomas Burnett
State Bar # 026509
1744 South Val Vista Drive, Suite 208
Mesa, AZ 85204
480-347-9116
[email protected] Comment to the April 27, 2020 Task Force Response:
My Comment in Opposition relates to the Task Force’s recommendation to eliminate Ethical Rule 5.4 to allow non-lawyer ownership of law firms. As described below, eliminating ER 5.4 will not increase access to justice, will cause damage to the legal profession generally, and will only financially benefit lawyers and non-lawyer investors to the detriment of the underserved.
On January 30, 2020, the Task Force released its Proposal. The first set of comments roundly disagreed with the Proposal, with a few exceptions, mostly from out-of-state interests. The Comments’ subject matter varied, some comments decried the negative effects the proposals would have on the legal system in general, others focused on the ethical clashes that would result from non-lawyer ownership of law firms, while others demanded answers to the question, “How does eliminating ER 5.4 increase access to justice?” On April 27, 2020, the Task Force issued its Response. The latter question was largely ignored in the Response. And for good reason: As Mr. Geoffrey Trachtenberg pointed out in his March 20, 2020 comment, “the “Access to Justice” mantra is being coopted as a Trojan Horse; it’s being used by private equity and hedge funds who desire to squeeze every last dollar out of the legal practice.”
As it relates to ER 5.4 the Response addresses “Access to Justice” only briefly and attempts to use the Covid-19 pandemic as leverage. Literally, other than hyperbole, there is no explanation for how eliminating ER 5.4 would increase access to justice.
Following is a summary of the Task Force’s comments regarding elimination of ER 5.4 and its relationship to “Access to Justice”, along with this authors response:
1. Innovative ways to conduct business which helped law firms through the pandemic would not have been possible without an “infusion” of new technology and emergency changes to existing court rules
a. Response: Yes, and this was all done without eliminating ER 5.4. It turns out attorneys, judges, and their wonderful staff can adopt new technologies, create innovative ways to conduct business, and respond to emergencies.
2. “The Task Force recommendations, while not foreseeing the pandemic, fulfill its charge to ignite similar innovation into the traditional services and to expand access to justice, not just for low income and indigent persons, but for working- and middle-class persons.”
a. Response: This is hyperbole. It doesn’t say how eliminating 5.4 would increase access to justice.
3. “The effects of the pandemic will severely increase the need for legal services”.
a. Response: How and why? Maybe the need for legal services will increase, maybe it won’t. But how does eliminating ER 5.4 increase access to legal services?
4. “These proposals will be increasingly relevant and necessary to ensure the public’s legal needs are met.”
a. Response: How?
5. “Moreover, the financial impact of the pandemic on some law firms may be severe. The ability to partner with other professionals to create innovative ways to deliver legal services in addition to the ability to attract capital may well help firms survive and thrive in what will likely become a new normal.”
a. Response: How does this relate to access to justice? Instead, it panders to attorneys and ignores reality: there are other, more reasonable, ways to gain access to capital and keep the legal profession alive during this time of crisis without eliminating ER 5.4.
6. “Adopting the changes would allow Arizona to expand access to justice while protecting the public, the very charge the Task Force was given.”
a. Response: How?
At the end of the day, no explanation is provided, because there is none. Because it is illogical to believe that adding a second layer of “professionals” (the non-lawyer owner) to a law firm, would result in an increase in access to justice. An explanation does not exist because “Access to Justice” by eliminating ER 5.4 is private equity’s Trojan Horse. It is the same reason non-doctor/dentist ownership of medical and dental practices has not increased access to dental or medical care. It only results in worse dental and medical care. We have seen this play out: dentists/doctors can only meet with you for 10 minutes because that is the only time allotted under their investors’ business model. The primary care physician walks in the office to say hi and tell you what the diagnosis is before he hurries out of the room b/c if he doesn’t fit in 120 patients in one day, the owners are going to decrease his compensation.
The only way to pay for the non-lawyer’s partnership interest is to increase profits. That does not translate to an increase in access to justice.
Unlike the consumer product business model of selling widgets, where prices can decrease as competition increases when more companies produce the widget, in the legal, medical, and dental context, the “widget” is the professional’s service. It is the dentist’s work on your crown, the doctor performing a surgery, or a lawyer trying your case for which the client pays. The cost of legal representation doesn’t decrease as the layers of ownership increase- the opposite is true.
Now that the room is cleared of the apparition that elimination of ER 5.4 has anything to do with "access to justice", we can have a candid discussion regarding what it is about: Money.
1. In England non-lawyer ownership of law firms was introduced in 2011. Is nine (9) years long enough to determine if non-lawyer ownership of law firms increased access to justice? If it is, the following is what has happened in England: Overwhelmingly, the “infusion” of non-lawyer ownership was injected into the personal injury market. (1) Personal injury law firms have become publicly traded on the London Stock Exchange. But wait a minute? Like Arizona, personal injury cases in England are handled on a contingent fee basis. This is a “no win/no fee” structure which presents no barrier to the entry of legal services for no- and low-income clients. If the purpose of eliminating ER 5.4 is to increase access to justice, why are most non-lawyer ownership models entering a field with no economic barrier to entry for no- and low-income clients? Money.
2. In England, while non-lawyer ownership in areas of law practice which present no economic barrier to entry for no- and low-income clients has ballooned, other areas have seen virtually no non-lawyer ownership, including the areas of “Civil Liberties, Immigration, and Financial Advice.” (2)
3. In an interesting twist, In England, many of the non-lawyer owned personal injury law firms are owned by insurance companies. Once non-lawyer ownership was approved, liability insurance carriers have formed their own personal injury law firms to whom they refer their injured clients/insureds. (3)
4. Speaking of England, citations to Crispin Passmore’s writings are quoted throughout the Response. The Response refers to Mr. Passmore as the former head of the Solicitors Regulation Authority in England and Wales. This is certainly true; but what is also true is that Mr. Passmore is the owner of “Passmore Consulting” a consulting firm which earns its business from consulting businesses in the UK; among other things, it provides consulting for law firms that want to adopt the non-lawyer ownership model (ABS model). His firm’s website states: “Regulatory reform is creating new opportunities in the UK and the US. I can help you explore these changes…” And “Around the world legal markets are starting to open. They are looking to England & Wales because of the regulatory reform and pace of change here. I am already helping other national regulators, investors, global legal business, UK law firms and a wide range of other legal service providers. Let me help you too.” (https://www.passmoreconsulting.co.uk/)
5. The takeaway? Nine years of non-lawyer ownership of law firms have not improved access to justice in England. (4)
Although the ABS model has existed in England for nearly a decade, there is zero evidence that non-lawyer ownership of law firms does anything but line investor pockets. Unfortunately for proponents of eliminating ER 5.4, lining investor pockets with legal fees, causing the personal injury and litigation fields to become “infused” with non-lawyer marketing and investor appetite, is not the stated purpose of the Task Force. The curtain has been pulled back and the wizard is just a group of profit-hungry investors.
What may be effective in fighting access to justice inequality is an “infusion” of capital into Legal Aid and other services which provide free and low-cost legal help, the requirement that lawyers perform a minimum amount of pro bono work per year and a requirement that, as a portion of their annual CLE credits, some of those credits are directed toward an understanding of the legal needs of no and low-income clients. Oftentimes what is needed is a consistent reminder to compel good people to act.
In summary, eliminating ER 5.4 will not increase access to justice, will cause damage to the legal profession generally, and will only financially benefit lawyers and non-lawyer investors to the detriment of the underserved.
Endnotes:
1. See “Nick Robinson, When Lawyers Don’t Get all the Profits: Non-Lawyer Ownership, Access, and Professionalism, 29 Geo. J. Legal Ethics 1, 20-21 (2016)
2. Id at 21.
3. Id at 22.
4. See Robinson, at 23-28