American Bar Association motion exposes ABS fault line

Chicago: Annual conference

The widening fault-lines in the US legal profession over alternative business structures (ABSs) are set to be on show this week at the American Bar Association annual conference in Chicago.

The governing House of Delegates is set to debate a motion reaffirming a policy dating back to 2000 describing lawyers sharing fees or law firm ownership with non-lawyers as “inconsistent with the core values of the legal profession” and that the bans on them should be retained.

The motion has been proposed by the state Bar associations of Illinois, New York and New Jersey, as well the ABA’s tort, trial and insurance practice section and solo, small firm and general practice division.

However, it is opposed by several other ABA bodies: the standing committee on professional regulation, the Center for Innovation, the standing committee on ethics and professional responsibility, and the standing committee on lawyer referral and information services.

US lawyers are regulated by individual state supreme courts – ABA resolutions are persuasive but not binding.

ABSs have been licensed in Arizona since last year, while Utah has allowed them since autumn 2020 as part of a regulatory sandbox but is not yet a permanent regulatory change. California is looking at a regulatory sandbox and liberalisation is being examined in other states too.

The motion said that, with such debates going on, it was important to reaffirm the policy and “why non-lawyer involvement in the practice of law is such a threat to clients and our system of justice”.

The reasons included that, while lawyers were “subject to the highest ethical standards and are accountable when they do not meet them”, non-lawyers were not.

It went on: “Where the non-lawyers are not subject to a lawyer’s management authority but share in the fee, there is no way to assure that the twin pillars of confidentiality and conflicts of interest are observed by the non-lawyer…

“Adherence to the profession’s core values such as undivided loyalty to the client, competence, and confidentiality have been key to the success of our justice system – the envy of the world. Non-lawyers do not have this focus.”

The proponents argued that the “perceived benefits” of non-lawyer ownership – such as improving service to clients, meeting law firm capital and profitability needs, advancing access to justice and broadening diversity – were outweighed by the “significant concurrent negative impact to the public and the legal profession”.

The motion recorded that the opponents, among other things, had “substantive concerns” with the assertions it contained and considered that the issues raised were too “complex and divisive” for the amount of time available to discuss at the House of Delegates, which meets twice a year.

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