"two heads looking toward each other"Author’s Note: the views and opinions presented here reflect those of Ralph Baxter’s essay on regulatory reform and do not necessarily represent the views or opinions of the author or IAALS. Part 1 in this series explores the other side of this debate.

The reform of key provisions in the regulatory scheme governing the practice of law is a hot topic in states across the country. Particularly controversial is the issue of whether people who are not licensed lawyers should be able to co-own law firms, a topic explored in the recent set of essays published in the Yale Law Journal as part of its “A Debate on the Future of the Legal Profession: Increased Nonlawyer Participation.”

Stephen Younger argues against nonlawyer ownership on the grounds that it would threaten the independence of the legal profession and would not solve the access to justice crisis. In contrast, Ralph Baxter offers a pro-reform perspective, arguing that reforms are necessary to meaningfully address the access to justice crisis—and that state bar association inaction on these issues constitutes a dereliction of duty. 

In part one of this two-part IAALS blog series, we explored Younger’s argument in “The Pitfalls and False Promises of Nonlawyer Ownership of Law Firms.” This piece details Baxter’s opposing perspective as set out in “Dereliction of Duty: State-Bar Inaction in Response to America’s Access-to-Justice Crisis.”

The Illusion of Access to Justice

In his essay in favor of reforming current law firm ownership rules, Baxter argues that the civil justice system works well for certain segments of the U.S. population—namely, those with money and the best education. For everyone else, “access to justice is largely an illusion.” 

Baxter cites the well-established research on the wide swath of people and small businesses in the U.S. that do not receive legal assistance (or enough legal assistance) for their civil justice issues. The direct harm experienced by those priced out of the system can be measured in deportations, evictions, lost business licenses, and other serious consequences across our communities. The harm to our justice system is a further erosion of the public’s trust and confidence. 

State Bars Bear Responsibility 

“State bars made the rules that caused the crisis,” writes Baxter. “It is their duty to fix them.” 

For Baxter, state bar associations bear ultimate responsibility for the functioning of the justice system by virtue of these organizations having been delegated “virtually total authority to govern the way legal service is delivered.” As Baxter points out, the self-regulated legal profession has, over time, evolved into doing more than simply regulating lawyers. Today, it dictates who can deliver legal services and how they can deliver them. While public protection is a fundamental mission of every state bar association, in practice, the prohibitions and prescriptions of this outdated regulatory scheme “have created and perpetuated systems that fail to serve most of their people and small businesses.”

Baxter specifically targets three central elements of the rules that he purports must be reexamined:

  • Restrictions on who can deliver legal services through unauthorized practice of law rules
  • Rule 5.4’s prohibition on the sharing of profit and ownership between lawyers and other professionals
  • Rule 5.4’s practical effect of limiting access to capital 

A Roadmap for State Bar Action

Baxter claims that “[i]t is not enough to be open to rule change or to create a commission that writes a report only to conclude with inaction.” They “need to get something done.”

He calls on state bars to sincerely, thoroughly, courageously, and effectively reexamine the impact of regulatory rules on access to justice. This starts first, Baxter says, with state bars empirically assessing the functioning of their state’s legal system. Data is the key. 

Second, Baxter suggests state bar associations reconsider the fundamental objectives of their regulatory models. Despite current state bar assertions that the regulatory scheme is designed to protect the public, “[t]he system quite clearly does not protect consumers.” (Whether the rules are intended more to protect lawyers’ monopoly over legal services is another question, and Baxter suggests that the author of the opposing essay advances this perspective.) 

Baxter also advances a less-often discussed objective of professional regulation: enabling legal services for all. “In the context of twenty-first-century realities, our regulatory models should seek to enable every person and organization to have access to the legal service they need.”

Armed with real data and a clear policy objective for professional regulation, state bars can begin to consider rules changes. At this stage, Baxter cautions, “[t]here will be no silver bullets, no surefire solutions, no risk-free ideas.” Yet bar associations have a duty to consider such changes and then—importantly—make them. 

A Proposed Roadmap for State Bar Action

While he suggests the three-step process detailed above for all state bar associations, Baxter has an opinion on the substantive path to legal regulatory innovation. 

  • State bars should replace the overbroad UPL ban with a tailored statement of the roles that require a law license. Two roles in particular fall within that category: advocating on behalf of another in a court proceeding and advising another on legal rights and responsibilities. Beyond these, “state bars should welcome assistance.” Where a particular role necessitates some level of training and expertise, a state bar can create the processes necessary for empowering these new providers. 
  • State bars should repeal Rule 5.4’s ban on nonlawyers sharing in a law firm’s financial success. The ability to provide incentive compensation (profit sharing and equity ownership) is critical for law firms serving consumers and small businesses. The realities of practice in these sectors (lower and less-consistent revenue models) requires new business models, new processes, new software, and new marketing strategies. Bringing professionals with relevant skills and expertise into the business—and offering meaningful incentives—increases a company’s ability to succeed and have an impact on access to justice in the community.  
  • State bars should enable law firms to take equity capital by removing 5.4’s ban. Equity capital is a popular means through which startups across industries fund their growth, and this option should be available to law firms. History has shown that law firms with the highest ethical standards can build very profitable businesses. Profit and ethics can coexist, and we should trust our profession to navigate new business structures that bring in non-lawyer equity partners. 
  • State bars should consider regulatory sandboxes as a means through which to encourage experimentation and innovation. Data is an important part of regulatory innovation, and regulatory sandboxes provide a means through which to gather information on effective and safe new ways of delivering legal services.  

We Must Permit Possibilities 

Baxter writes: 

“I am not saying my recommendations are certain to work. I am saying this: if we open our system to permit it to benefit from people, models, and technology that are currently foreclosed, we are highly likely to do better. I propose that we stop prohibiting possibilities.”

While it will take time to assess the impact of certain regulatory innovations, Baxter argues that we can be fairly sure it is possible to do better than the status quo which has shut many out of the current system. Now is the time, he says, for state bars to pursue their core mission and lead the profession to embrace new approaches.