Seattle: Set to open up to non-lawyer owners
The slow creep of alternative business structures (ABSs) into the US is set to take a significant step forward next month when plans for a pilot are put to the supreme court of Washington state.
It will provide for time-bound, limited exemptions from rules that prohibit non-lawyers owning and sharing in the fees of law firms based in Seattle and other parts of the state.
The federal system means that each state’s supreme court governs the regulation of lawyers within their jurisdiction.
A major block in the US is the rule against the unauthorised practice of law. While this concept does not exist in the UK, the notion of unregulated legal services providers does not exist in the US – only licensed lawyers who are members of their state bar are permitted to deliver legal services.
Washington has been considering reform for some years and the court requested its own practice of law board and the Washington State Bar Association (WSBA) to collaborate on a proposed order to create the pilot, which will be submitted next month. This introduces entity regulation – lawyers are individually regulated in the US.
The move follows the states of Arizona – which has led the way in the US by permanently adopting ABSs in 2021 – and Utah, which began a pilot the year before.
The draft order has been put out for consultation. The pilot is expressly data driven to assist the court in deciding whether to make the reforms permanent when it comes to an end.
This will be after two years of reporting by the entity most recently granted authority by the court to participate in the pilot.
The ‘framework for data-driven legal regulatory reform’ created by the practice of law board “is a methodology that permits regulators and others to assess the potential risks and the benefits of an intended legal regulatory reform by using the scientific method and data-driven processes”.
The draft order details the conditions to take part in the pilot, including adherence to ethics rules and regular reporting of data and information relating to their delivery of services to the public.
It acknowledges that rule restricting ownership of law firms, “while serving important public protection purposes”, also “serve as barriers to the exploration, and data-driven testing, of legal regulatory reforms that would permit entities to provide legal and law-related services to consumers in Washington, whether or not the provision of those services would constitute the practice of law
The report on the framework, written by board chair Michael Cherry, said: “Under the status quo, legal regulatory reform takes too long to accomplish, is too bespoke, is rarely evaluated to ensure that the reform meets the desired goals of the reformation effort, and rarely involves the public (nonlegal professionals).
“There are several possible reasons why legal regulatory reform currently takes too long. Although the legal profession often sees itself as socially progressive, it is generally conservative when it comes to fiscal and regulatory matters, especially with regards to changing processes by which the profession regulates itself.”
The framework sets out a “three-dimensional” model that not only measures the present benefits and risks of a particular business but also estimates future risks.
The first research into the introduction of ABSs in Arizona and Utah reported in 2022 that it was “spurring innovation”.
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