Arizona Carries Regulatory Reform Momentum Forward with Historic Vote

September 22, 2020

On August 27, the Arizona Supreme Court voted unanimously to eliminate its ethics rules barring nonlawyers from having an economic interest in law firms or participating in fee-sharing and streamlined rules governing how lawyers can advertise and connect with potential clients. The court also approved a new category of nonlawyer licensee called “Legal Paraprofessionals” (LPs), who will be able to represent clients in court.

The approved changes adopt and enact the recommendations made by Arizona’s Task Force on the Delivery of Legal Services. In February, the task force filed a petition with the supreme court to eliminate Ethical Rule (ER) 5.4 and to adopt a framework for regulating alternative business structures (ABSs), in order to allow for more innovation as well as to make legal services more affordable while still protecting the public.

ABSs, which already exist in countries such as Australia, England, and Wales, have shown success in increasing innovation for the types of legal services that reach everyday people. A 2016 review of the Law Society of England and Wales illustrated that these new types of firms were active in family law, wills & trusts, probate, personal injury, ADR/other litigation, and others, suggesting that ABSs were indeed serving the needs of the poor and middle class, not just or even primarily the wealthy. In addition, ABSs in England and Wales are in general three times as likely to make use of technology compared to other providers, twice as likely to implement management innovation, and show higher levels of service development. These factors make increased quality of legal services, as well as decreased costs, extremely likely.

The evidence is clear: by permitting attorneys to partner with other professionals, those attorneys are more likely to create new and better services for clients—and a more sustainable legal practice overall. Alternative business structures not only benefit the public, whose ability to afford legal services—and their faith in our justice system—erodes daily. They ultimately benefit lawyers, too, by allowing them to provide more efficient, affordable services to a much larger volume of clients. And with law firms also feeling the economic impact of COVID-19, now more than ever is the time for the profession to explore new ways of delivering legal services, new ways of partnering on those services, and new technologies to make it happen.

In Arizona, ABS-hopefuls will have to go through a rigorous application process as well as comply with a code of conduct that mandates they have an internal compliance attorney. During the review process, a Committee on Alternative Business Structures, whose members will be appointed by the Arizona Supreme Court, will consider whether the applicants meet the following regulatory objectives:

  • Protecting and promoting the public interest
  • Promoting access to legal services
  • Advancing the administration of justice and the rule of law
  • Encouraging an independent, strong, diverse, and effective legal profession
  • Promoting and maintaining adherence to professional principles

Accompanying the changes to the ethics rules is the approval of a new licensure process to create Legal Professionals. This new type of professional would, in many ways, be the legal system’s equivalent of a nurse practitioner in the medical field. According to a statement from the court, “Those interested in becoming LPs would have to meet education and experience requirements, pass a professional abilities examination, and pass a character and fitness process; successful candidates would be affiliate members of the state bar and would be subject to the same ethical rules and discipline process as lawyers.”

You can learn more about these changes to law firm ownership and the creation of LPs in short videos posted on the Arizona Task Force on Delivery of Legal Services homepage.

These groundbreaking reforms will take effect on January 1, 2021. Arizona’s decision comes right on the heels of Utah’s historic vote earlier in August to establish a regulatory sandbox for nontraditional legal services providers (including entities with investment or ownership by professionals other than lawyers). The sandbox, based on principles developed by IAALS’ model, is a first-of-its-kind program that will allow the Utah Supreme Court to gather invaluable data on the benefits provided by these new legal service providers, as well as assess any risks they may pose to consumers.

Although these reforms take different shapes, the pioneering developments in both Arizona and Utah signal the growing momentum for regulatory reform that’s taking place across the country. More and more, states are realizing that our current method of legal services delivery is untenable—and that the access to justice crisis is only worsening. We need bold and innovative solutions to meaningfully address this issue, and changes like these are promising examples. We applaud the leadership shown by the Arizona Supreme Court and are eager to see what the state will accomplish as they begin to reimagine law.