Reason No. 24 For Non-Lawyer Ownership: Access to Justice

One of the core contentions of the future of the new normal of the @reinvent law crowd is that our changing paradigm demands that we throw off the chains of law firm ownership so that non-lawyers (as in for-profit corporations) can own law firms. The usual justification is the infusion of capital and systems to make lawyers more 21st Century-ish, which will allow us to maximize profits due to less costly iPads.

But in the Wall Street Journal Law Blog (of all places), Jennifer Smith writes of a new, largely unimagined reason to let Verizon take the lion’s share of DLA Piper: To bring legal representation to the underserved working poor, who can read all about it if only they have a WSJ subscription.

The idea comes from a law review article by USC Lawprof Gillian Hadfield, who has been steadfast and sincere in her efforts to find ways to provide affordable legal counsel to regular folk, and whom I’ve applauded for her efforts even if they are sometimes myopic.  The summary states:

The U.S. faces a mounting crisis in access to justice. Vast numbers of ordinary Americans represent themselves in routine legal matters daily in our over-burdened courts. Obtaining ex ante legal advice is effectively impossible for almost everyone except larger corporate entities, organizations and governments. In this paper, I explain why, as a matter of economic policy, it is essential that the legal profession abandon the prohibition on the corporate practice of law in order to remedy the access problem.

The prohibitions on the corporate practice of law rule out the use of essential organizational and contracting tools widely used in most industries to control costs, improve quality and reduce errors. This keeps prices for legal assistance high by cutting the industry off from the ordinary economic benefits of scale, data analysis, product and process engineering and diversified sources of capital and innovation. Lawyers operating in law firms have not generated these benefits but they have appeared in countries, such as the U.K., where the corporate practice of law doctrine does not prevail. Eliminating restrictions on the corporate practice of law can significantly improve the access ordinary Americans have to legal help in a law-thick world.

It’s de rigueur to throw in the UK’s elimination of the prohibition of non-lawyer ownership, though this would be the same country that now wants to save money by streamlining the prison pipeline by incentivizing lawyers to plead their clients guilty as quickly as possible by paying lawyers more for quickie pleas.  Certainly an efficient concept, if not quite what most of us consider a good idea for clients.

The gist of Hadfield’s argument is that through efficiency of scale, by applying the talents of corporations to the practice of law, we can reduce the “cost” to consumers and thus make legal representation less expensive.

Under the existing business model—in which legal services for ordinary individuals are provided by solo and small firm practitioners operating in traditional law-office settings—these costs are simply too high. To reduce the cost of law and increase access to legal assistance, the form in which legal services are produced and delivered to the market has to change. This will require much larger scale organizations and more creative and complex financial and management relationships between those who provide legal expertise—lawyers—and those who provide many of the other components that go into ultimately delivering legal assistance to people.

In support of the notion, Hadfield switches from the British folly to medicine, since it’s so highly uncontroversial in delivering low cost, high quality services to the public:

In this law is just like another modern complex service: medicine. Costs in health care have been controlled only as a result of substantial organizational innovation. By restricting the organizational and contractual structure of law to conventional solo and small firm practice, the legal profession ensures that the changes necessary to make legal help more affordable to ordinary Americans will not occur.

If we squint enough and ignore the outrageous charges hospitals levy on ordinary people lacking insurance, we’re still left with the fact that this is an unworkable analogy. Medicine’s costs involve massively expensive equipment (CAT scans and surgical suites) that have to be in service 24/7 to be profitable and hard secondary expenses (like pharmaceuticals).  Physicians’ fees are trivial compared to these other expenses. Yellow pads just aren’t in the same league.

While this is largely offered as a concept, I suspect what Hadfield pictures is the Wal-Mart model.  It’s batshit crazy, and at the same time, a novel approach that does better than merely saying “can’t do it” when there remains a huge segment of American society that cannot afford legal services.  By this, I distinguish between those who are too cheap to pay a lawyer, and rather focus on those who truly can’t afford counsel. They exist and in huge numbers.

But Hadfield’s co-optation into the corporate ownership scheme is, ahem, Utopian to say the least. She envisions the joys of economies of scale, access to capital and efficient delivery methods, all of which will reduce the amount lawyers need to charge and bring legal costs in line with the ability of ordinary folks to pay. What she neglects to consider is that corporations don’t invest capital for fun or to make society a better place: they do so to maximize shareholder benefit, increase their return on investment, make money.

There are few corporations as socially conscious as Ben & Jerry’s, but walk into a store, tell them you’re poor and ask what size cone they want to give you for free. No corporation can exist by giving it away (at least for more than one day a year).  This doesn’t make them evil, just financially viable. Lawyers want to be financially viable too. It’s not a crime.

On the one hand, it would be fabulous if every Wal-Mart contained a walk-in, low-cost law office to provide legal assistance to Wal-Mart shoppers. But the primary “cost” of law isn’t computers, yellow pads or telephones. It’s not even marketing, which would be immediately eliminated if there was a steady stream of needy clients waiting at the door. It’s lawyers.

Lawyers, having spent four years in college and three in law school, forgoing other opportunities, paying tuition and amassing debt, need to earn a living.  And as much as the public needs “access to justice,” that doesn’t translate into lawyers accepting the hourly wage Wal-Mart prefers to pay its employees. Hadfield’s ideal aside, our oath of office did not include an oath of poverty.

That Gillian Hadfield continues to think of new and imaginative ways to provide legal services to those who can’t afford them is important, as clients tend to be the forgotten stakeholders whenever we talk about fixing the system.  But to hitch her wagon to non-lawyer ownership of law firms isn’t a solution, either for lawyers or clients. If she got her way, it would be far more likely disastrous for underserved Americans, who not only wouldn’t have access to low cost legal services but would be forced to go to Wal-Mart to find out. That’s just wrong.

7 comments on “Reason No. 24 For Non-Lawyer Ownership: Access to Justice

  1. Mark Lyon

    I’ve yet to see a persuasive reason for non-lawyer ownership of law firms. But, I do have some experience with the idea of Wal-Mart law.

    In many communities, Wal-Mart was the center of commerce. While older small towns have a square bordered with law offices, banks, cafes (or, vacant storefronts depending on how well the town is doing), newer places are not being built with central business areas. Wal-Mart and its outbuildings, in some ways, fill that void. Looking to find a high-traffic area, I once examined what it would take to rent one of the spaces at the front of the store.

    Few law practices would be able to live up to their standards. The Wal-Mart Realty Tenant Handbook makes it rather clear that you’d be open 10 hours a day, Monday through Saturday and 5 hours on Sunday, 52 weeks a year. Using the rules they have for optometrists, it might be possible to have some of those hours handled as coverage where once can come make an appointment but not actually see an attorney, but during at least eight hours Mon-Sat, you’d need at least one attorney on site. So, it’s not going to work for a solo shop if you’re ever going to be in court. There are also customer service and satisfaction standards that might also be unworkable in a law practice context, where results cannot be guaranteed.

    While the leases are negotiable and the idea is probably novel enough that Wal-Mart would make some exceptions to give it a try, there seemed to be a lot of hurdles to jump for a small shop to give it a try. One thing is for certain, though, as you allude to above – the clients would surely be interesting.

    1. SHG Post author

      It may be unworkable in its current form, but then the next step is variations to accommodate functional reality. The idea isn’t so much the nuts and bolts of Wal-Mart, per se, as it is trying to find the overlap between a viable practice of law, relative affordability and consumer patterns. I can’t say for sure that the answer is out there, but I can say that sacrificing one worthy interest for another isn’t the solution either.

      As I keep writing, we need to sit down in a really big room, put all the concerns on the table and try to arrive at change that doesn’t screw one to fix another. Piecemeal band aids will not save the legal profession or solve the needs of clients.

  2. Carolyn Elefant

    Since non-lawyer ownership is an “entrepreneurial concept,” I’d like to see a numerical cost comparison of the cost per client for a criminal or family law or eminent domain case handled by a solo/small versus the cost when handled by a non-lawyer owned, for profit entity. Even adding up economies of scale (e.g., having paralegals handle lower cost tasks, reduced LEXIS/Westlaw fees and lower rent), some matters involve hard costs that can’t be reduced. Filing fees, deposition and transcript fees (these can reach thousands of dollars), time spent sitting in court or at hearings and just waiting (not as if you can leave) and cost of expert witness. I don’t see how non-lawyer ownership reduces these costs – except by imposing rules that would preclude lawyers from spending the money to begin with (for example, the group might say “we mandate pleas for Ds who have 2 priors” or “we will only cover the cost of 3 depositions no matter what). Given that non-lawyer ownership is an “entrepreneurial” concept, I would love to see a business plan that compares the cost of legal service in a non-lawyer ownership operation to the cost for a single solo shop. Frankly, I don’t think that the savings would be significant.
    In addition, there are so many steps between “non lawyer ownership” and completely autonomous, independent solo and small firms that it seems foolhardy to go to the end of the spectrum before experimenting with what is in the middle. For example, I’ve often thought that there might be ways for solos/smalls to share costs – common office space, shared associate costs or legal research subscriptions. I realize that there are potential problems with all of these suggestions (confidentiality, conflicts and lawyers’ inability to be cooperative) but I am sure there are other, far less extreme ways to inject capital (if that is really the problem) while still ensuring meaningful access to justice.

    1. SHG Post author

      In my niche and my area, we have long enjoyed the benefits and synergies of sharing space, services, staff, etc. It’s good business and there is nothing new about maintaining as reasonable a level of expenses as efficacy permits. I agree that the variable cost savings of non-lawyer ownership, at least for solo and smalls, is marginal at best, and won’t have any meaningful impact on the fees.

      But hey, I don’t blame Gillian for trying. We just need to make sure that her efforts serve both her cause and the vitality of the legal profession as a whole.

  3. Catherine Mulcahey

    Why leave medium- and large-sized law firms out of this discussion? Is anyone seriously suggesting that economies of scale result in lower fees when there are 200 lawyers in the firm instead of two? The “essential organizational and contracting tools widely used in most industries to control costs, improve quality and reduce errors” haven’t resulted in bargain rates for the large corporations, organizations and government entities that purchase legal services from the biggest law firms in the country.

    1. SHG Post author

      But they’re greedy, evil law firms. It would be entirely different if they were owned by kindly for-profit corporations. Oh, wait…

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