A few weeks ago, an editor at the Oxford University Press site, “Academic Insights for the Thinking World,” was kind enough to write me and ask if I might care to submit an essay for their site. Yes, I’d be delighted, was my response; what about? “Up to you – within reason, of course.”
“Understand,” he was quick to add, “We’ve never actually published anything by a non-Oxford University Press author.” OK, got it….
Shortening what was actually not even that long a story, over this past weekend they published my essay, “What could be the global impact of the UK’s Legal Services Act?”
And they were kind enough to give me permission to republish it. So, verbatim, here it is:
November 8th, 2014
In 2007, the UK Parliament passed the Legal Services Act (LSA), with the goal of liberalizing the market for legal services in England and Wales and encouraging more competition—in response to the governmentally commissioned ‘Clementi’ report finding the British legal market opaque, inflexible, overly complex, and insulated from innovation and competition.
Among other salient provisions, the LSA authorized the creation of ‘Alternative Business Structures,’ permitting non-lawyers to take managerial, professional, and ownership roles, and explicitly opening the door to law firms raising capital from outside investors and combining with other professional services firms—even listing publicly on a stock exchange. All this has made the UK’s £25-billion/year legal marketplace “one of the most liberalized in the world,” according to the Financial Times.
Our question for today is whether this bracing demolition of guild-like protectionist rules will stop at the English coastline—more specifically, whether it will leap the North Atlantic to the US, the single largest legal marketplace in the world by far, now just north of $250-billion (£150-billion) per year. It would be the irresistible force meeting the immovable object.
Two predictions may be made without fear of contradiction.
First is that the American Bar Association (ABA), with its 400,000 members, will resist any incursions into US lawyers’ monopoly over legal services with every weapon at their disposal short of, perhaps, violence. A core function of the ABA is promulgating the “Model Rules of Professional Conduct,” which have the force of law in 49 states. ABS’s would flatly offend Rule 5.4(a), prohibiting fee-sharing with a non-lawyer, and 5.4(d), prohibiting practicing in any organization where a non-lawyer owns an interest.
We know ABA opposition will be fierce because it happened once before. In 2000, the ABA’s governing House of Delegates entertained a proposal to amend the ethical rules to permit “multidisciplinary practices” (consider them the functional equivalent of the UK’s ABS’s). This went down to “crushing defeat” as the state bars of Illinois, New Jersey, New York, Florida, and Ohio joined in “strident” denunciation of the heresy of fee sharing and vehement “reaffirmation of the core values of the law of lawyering.”
The horrified opposition cited fears of the invasion of the profession by predatory investors prepared to sacrifice clients on the altar of profits. Adam Smith – or for that matter Peter Drucker – might be skeptical of the long-run viability of a business premised on putting its clients last, but be that as it may, I’m reminded of the remark by American Lawyer editor-in-chief Aric Press some years ago that the magazine’s creation of the notorious profits-per-partner scorecard for law firms “did not introduce the profession to greed.”
Lest you believe the world might have moved on in the intervening decade and a half, and that we have learned guilds tend to collapse of their own sclerosis by now, permit me to disabuse you of that hope. Earlier this year the state bar of Texas issued a binding opinion that law firms there may not include the terms “officer” or “principal” in the job title of non-lawyer employees. “Don’t mess with Texas,” indeed.
Finally, note that the states leading the charge here are six of the ten largest in the US, comprising nearly one-third of the country’s total population. Their opposition will not be trifling: They have ground troops.