Utah Task Force Calls for ‘Profoundly Reimagining the Way Legal Services Are Regulated’

Update 8/29/19: Utah Supreme Court Votes to Approve Pilot Allowing Non-Traditional Legal Services.

Faced with an ever-widening gap in access to legal services, a Utah task force has called for “profoundly reimagining the way legal services are regulated in order to harness the power of entrepreneurship, capital, and machine learning in the legal arena.”

Appointed by the Utah Supreme Court to study innovative approaches to increasing access to and affordability of legal services, the Utah Work Group on Regulatory Reform has proposed a new structure for the regulation of legal services that would provide for broad-based investment and participation in business entities that provide legal services, including non-lawyer investment in and ownership of these entities.

In a newly issued report, Narrowing the Access-to-Justice Gap by Reimagining Regulation, the work group recommended that regulatory reform occur in two ways:

• Substantially loosening regulatory restrictions on the corporate practice of law, lawyer advertising, solicitation, and fee arrangements, including referrals and fee sharing.
• Simultaneously establishing a new regulatory body, under the supervision of the Supreme Court, to advance and implement a risk-based, empirically-grounded regulatory process for legal service entities.

This new regulatory body would solicit non-traditional sources of legal services, including non-lawyers and technology companies, and allow them to test innovative legal service models and delivery systems through a “regulatory sandbox,” an approach that would permit innovation in designated areas while addressing risk and generating data to inform the regulatory process.

This Utah report comes on the heels of recommendations by a State Bar of California task force to make sweeping changes in the lawyer regulatory structure in that state. These moves and others signal increasing recognition by bar officials in the U.S. that addressing the justice gap will require significant changes in the regulation of legal services.

The Utah Supreme Court created the work group at the request of the Utah State Bar. It is chaired by Supreme Court Justice Deno Himonas and Salt Lake City lawyer John Lund, a past-president of the bar.

The bar’s request to the court, which came in the form of a letter from immediate past-president H. Dickson Burton, asked the court to appoint a working group “to promptly study possible reforms and make recommendations for revisions, possibly major revisions, to the rules of professional responsibility so as to permit lawyers to more effectively and more affordably provide legal services and do related promotion of those services.”

The working group’s report provides extensive details on the scope of the justice gap in the United States, noting that the U.S. ranks 99th out of 126 countries in access to and affordability of civil justice. At the same time, the report notes that we “live in an age when disruptive innovation is occurring non-stop,” including in the justice system. The potential for these disruptions to benefit access to justice, the report says, are significant.

“If legal services can be provided to litigants and those with potential legal problems in a much more cost effective way, then true access to justice becomes possible for millions of people who currently get no help and do nothing. Technology, especially online legal services, exponentially increases the potential to improve access to justice. But it also simultaneously increases the risk of legal and practical harm to users if those services are not of sufficient quality. However, the potential benefits are too large to pass up, so changing how legal services are regulated to both open the door to innovation and protect litigants and other users in responsible ways is critical.”

To that end, the report calls for fundamental reform of how legal services are regulation — steps, it says, that require “equal parts courage, caution, imagination and deliberation.”

As already noted, one aspect of that reform is to loosen restrictions on lawyers — specifically restrictions on lawyer advertising, fee sharing, and non-lawyer ownership of and investment in law firms. In particular, the report endorsed a recommendation recently made by an Arizona task force to get rid of Rule 5.4 — the rule that prohibits non-lawyer ownership — and to allow lawyers and non-lawyers to form alternative business structures.

The second aspect of the reform called for in the report is to create a new regulatory body whose purpose would be to ensure that consumers have access to a “well-developed, high-quality, innovative, and competitive market for legal services.”

“The explicit goal of this approach is to develop a regulatory framework that allows, supports, and encourages the growth of a vibrant market for legal services in Utah and, ultimately, across the United States.”

In fulfilling that mission, the regulator would focus on the evidence of risk to consumers of new approaches to providing legal services and ways to mitigate any risks.

The report further suggests that the new regulatory body be developed in two phases. In phase one, an implementation task force would develop the funding and framework for this new regulatory entity and establish a pilot program to evaluate its operations. In phase two, the recommendations that come out of the first phase will be implemented in the form of an independent, non-profit regulator with authority over some or all legal services.

As outlined in the report, a key component of the first phase is a so-called legal regulatory sandbox.

“The regulatory sandbox is a policy structure that creates a controlled environment in which new consumer-centered innovations, which may be illegal (or unethical) under current regulations, can be piloted and evaluated. The goal is to allow the Court and aspiring innovators to develop new offerings that could benefit the public, validate them with the public, and understand how current regulations might need to be selectively or permanently relaxed to permit these and other innovations.”

Examples of participants in this sandbox, the report says, could be an accounting firm proposing to offer legal services alongside its accounting services, a technology startup using AI to help consumers complete legal documents, or a non-profit proposing to allow paralegals to provide limited legal advice without lawyer supervision.

The report concludes with a request to the Utah Supreme Court that it adopt the recommendations and direct their prompt implementation. That would include establishing the phase one regulator and delegating regulatory authority to run the sandbox. It would also require the court to exempt providers chosen to participate in the sandbox from limitations on the unauthorized practice of law and to make clear that lawyers who work with such providers would not be subject to discipline.

In addition to the two chairs mentioned above, others who served on this working group were: H. Dickson Burton, the bar’s immediate past president; Thomas Clarke, who recently retired as vice president of research and technology at the National Center for State Courts; Cathy Dupont, deputy administrator of the Utah State Courts; and Gillian Hadfield, professor of law and professor of strategic management, University of Toronto Faculty of Law (and recent guest on my LawNext podcast).

Also: Margaret Hagan, director of the Legal Design Lab and lecturer in law at Stanford Law School; Steve Johnson, past chair of the court’s Advisory Committee on the Rules of Professional Conduct; Lucy Ricca, former executive director of and current fellow with the Stanford Center on the Legal Profession; Gordon Smith, dean of the J. Reuben Clark Law School at Brigham Young University and Glen L. Farr Professor of Law; Heather White, past co-chair of the Bar Innovation in Law Practice Committee; and Elizabeth Wright, general counsel to the bar.