Outside Investment in Law Practice Benefits Consumers, Not Just Investors

Written by Tom Gordon

There's an excellent blog post by Ron Friedmann at Prism Legal arguing for abolishing the prohibition on outside investment in law practices, a position that Responsive Law strongly supports. In a responding blog post, Brian Focht at The Cyber Advocate claims that only bankers would benefit from lifting this restriction, and that those who want to do so are only interested in making more money. It's a common objection, so we'd like to address it here.

​Focht writes:
"Most of the people asking for non-lawyer ownership in law firms have a vested interest in the deregulation of the practice of law. Whether they want to be the law’s version of Turbo Tax, or whether they simply want to earn profitable returns out of a law firm’s revenue, how many of them really and truly want to create a better, cheaper, and more accessible law firm? How many of them really want to improve access to justice? How many of them just want more ways to make more money?"

Since Responsive Law's purpose is to speak on behalf of users of the legal system, we are most certainly taking this position as a way to improve access to justice and not as a way to make more money. We've testified numerous times to the ABA and state policymakers about the benefits of non-lawyer ownership. And we're a nonprofit organization, so we certainly don't have a financial stake in the improvement of the system.

The greatest benefit of outside investment won't come from a change in the practice of existing firms. Instead, it will come as other companies, both new and existing, are able to offer law as a consumer service on a scale that solos and small firms—the predominant deliverer of services that the average person needs, such as wills, family law, housing, and employment issues—are unable to offer. For example, a national company could develop training and supervision protocols for lawyers, teaching them how to provide legal services to their clients and providing not only the legal expertise they need, but also letting those lawyers focus on their core competency of practicing law, while letting a corporate office handle the business side of practice.

There is a clear disconnect between the 80 to 90 percent of Americans who cannot afford basic legal services and the growing number of recent law school graduates who currently have no employment prospects. Corporately-provided legal services would bridge this gap and allow the true democratization of law. Consumers would be able to take advantage of economies of scale that do not exist for small firms and newly-minted lawyers would be able to receive training and employment providing legal services at an affordable price.

Concerns that lawyers would shirk their ethical duties under pressure from corporate owners and investors are misplaced. Lawyers in every setting face financial pressures to act against their clients' interests. For example, associates at large firms face pressure to pad hours to meet billable hour goals. However, this financial pressure does not relieve an attorney of the obligation to follow the rules of professional conduct, and neither would financial pressure from shareholders. As an additional safeguard, the US could adopt a version of Australia's requirement that each firm with outside investment designate an officer to be responsible and liable for ethics violations.

Both the UK and Australia have permitted non-lawyer ownership for several years, and have shown that consumers benefit from the innovation it fosters, while predictions of diminished lawyer professionalism have been proven wrong. It is past time for the US to join its international brethren in adopting this reform.

Tom Gordon is Executive Director of Responsive Law.