This past week, the Arizona Supreme Court approved regulatory reforms to allow co-ownership of law firms and other legal services by private individuals with no law degrees.
By eliminating ethics rule 5.4, nonlawyers can now have a monetary interest in law firms according to the new framework known as “Alternative Business Structure.” A new licensing process will also allow individuals with no legal degrees to provide certain legal services and to represent clients in court. These individuals are set to be granted a license and will be called legal paraprofessionals.
This move is aimed at boosting innovation but also aims to ensure the public has legal protection with access to more affordable legal services. It was a change feared by legal firms because they will be competing directly with Big Four accounting firms for clients. Not only are these firms big, but they also have the tech expertise that many law firms have yet to invest in.
Big Four is the name given to the leading accounting firms in the world like Deloitte, PricewaterhouseCoopers (PwC), Ernst & Young (EY) and Klynveld Peat Marwick Goerdeler (KPMG), etc. These firms have steadily been establishing various legal services for their clients.
In his statement, Arizona Supreme Court Chief Justice Robert Brutinel said more people will have access to legal help and advice, and the new ruling allows for innovation in providing more affordable legal services.
In deciding, the dilemma of the judges was how much rule 5.4 was necessary to protect the public. They also had to consider what restraints the rule placed on law practices. It was decided that the state had the means to protect the public through the new framework and that scrapping the old rule would allow for legal modernization by removing restraints on legal practices.
Utah and California have already taken steps to test new business models for nonlawyer services. They will be collecting data to allow for the licensing of applicants under pilot programs. In Utah, these programs will run for two years.
Similar changes are also currently under consideration by bar organizations in Chicago and the District of Columbia