Arizona looks to become first US state to allow ABSs

Arizona: Petition to state court

Arizona has become the first state in the US to formally seek the introduction of alternative business structures (ABSs), it has emerged.

However, the ABS cause seems to have hit a hurdle in California, while Florida has become the latest state to start investigating them.

The Arizona task force on the delivery of legal services has filed a petition with the Arizona Supreme Court – which regulates the profession – to eliminate the rule which prevents lawyers sharing fees and/or going into partnership with non-lawyers, and create a licensing regime akin to that in England and Wales.

The 150-page petition says: “Eliminating the rule would mean, for example, that a professional nonlawyer administrator in a law firm could have an ownership interest or that a Fortune 500 company could be a passive investor. It also could mean that a law firm could attract nonlawyer talent… by providing equity in the firm.

It also proposed creating a category of “non-lawyer legal-service provider”, the limited license legal practitioner (LLLP).

An LLLP could appear in court and administrative hearings in limited practice areas and be an affiliate member of the State Bar of Arizona for regulation and discipline purposes. This would “fill a gap that exists between medium- and low-income individuals needing legal services and the cost of securing those services from the traditional legal market”.

In California, the state bar’s task force on access through innovation of legal services recommended exploring the viability of developing a regulatory sandbox as a means for evaluating possible changes to existing rules, such as the ban on ABSs. A sandbox has already been established in Utah.

However, the California State Bar’s board of trustees last week deferred a decision on this until May, despite approving several of the task force’s other recommendations.

A related study on Californians’ readiness for and attitudes toward online legal services found that data security, privacy, and the involvement of a lawyer were of significant importance to Californians when accessing legal information online.

“Law firm ownership is less important: While 65% of Californians say that a law firm being owned by lawyers is extremely or very important to them when deciding to use it, just 46% say the same about using a legal advice website.”

The board has meanwhile also set up a working group to develop a new category of legal “paraprofessionals” in the state.

In Florida, meanwhile, the chief justice of the state supreme court has agreed with the state bar association that the latter should conduct a study into the rules governing legal practice.

Chief Justice Charles Canady said: “The environment in which legal services are provided has been rapidly changing. In view of that changing environment, the challenges facing Florida lawyers, and the difficulties that many Floridians encounter in securing legal services, the court agrees that the Florida Bar should conduct a study of the rules governing the practice of law to ensure that our regulation meets the needs of Floridians for legal services while also protecting against misconduct and maintaining the strength of Florida’s legal profession.

“As you have suggested, the topics that should be addressed in this study include the following: lawyer advertising; referral fees; fee splitting; entity regulation; regulation of online service providers; and regulation of non-lawyer providers of limited legal services. Additional topics consistent with the subject of the study may also be addressed.”

He asked the bar to report back by 1 July 2021.

We reported last month that the bar in Washington DC was seeking comments on its proposal to allow ABSs.

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