The facts on the ground don’t help the cause.
This post continues in the vein of Part I (239), in illuminating the ways in which the structure of legal services regulation in the United States is highly balkanized, a condition which raises the costs of the justice system and creates impediments to serious efforts at reform.
In addition to framing the general issue, in Part I I sketched how combining U.S. Supreme Court and state court doctrines adds up to a scheme in which regulation is self-regulation by judges (read: lawyers) in the separate states and, further, the Court has shown little taste for intervening. It is the proverbial dog that doesn’t bark, that is, the absence of significant federal action that helps illuminate the condition of what I have called bar federalism.
Regulation of legal services has many sources and inputs
Let me be more clear about what I mean by regulation of legal services. “The law governing lawyers,” to use the phrase that the American Law Institute adopts for its influential Law Governing Lawyers Restatement, is certainly at the core of the edifice, fully encompassing the ethics rules adopted at the state level but based on the ABA Model Rules.
But Dean Andy Perlman of Suffolk Law School, a leading scholar of legal services and access to justice, elaborates by juxtaposing what he calls representational rules—those dealing with how lawyers should represent individual and institutional clients—and structural rules—those related to the profession’s structure. These latter rules are a kitchen-sink of regulations, covering topics such as lawyer advertising, law firms ownership, multijurisdictional practice, and so forth. The central insight here is that representational and structural rules are deeply connected, and reformers cannot tackle one without the other. Indeed, Perlman suggests that ultimately a “unified theory of professional regulation” is possible and even desirable. See Perlman, “Toward a Unified Theory of Professional Regulation,” 55 Fla. L. Rev. 977 (2003).
What I would add to this convincing formulation is that the rules governing bar admission and accreditation of law schools are, as well, key structural rules, and very much part of the ecosystem of professional services regulation. This is about who gets to be lawyers, on what conditions, and through what educational processes are questions essential to understanding how our justice system operates well or poorly on behalf of consumers and our common welfare.
As we move forward here to discuss the balkanized structure of legal services regulation, let me include all of these structural elements in the mix of what I mean by the label our bar federalism.
As I take up the topic of balkanization and its consequences, there is not space, nor, frankly, do I have the comprehensive expertise, to work through all, or even most, of the structural rules So let me drill down on this point with a few examples. I hope readers will agree that there are other, and maybe even better, examples that come to mind.
Licensure and credentialing
The way in which we establish the professional competency of lawyers did not spring from the head of Zeus. We did not inherit it from Roman Law or English Common Law. Not even the most bowdlerized Bible would have a Genesis-type passage reading “on the First Day the Lord created the bar exam.”
The truth is that we have our system of licensure and credentialing for reasons that are historically complex and can be understood, as some important scholarship as illuminated, only if we connect bar admission to the strategic effort to enhance quality and protect the public (the most benign explanation) or to the effort to restrict the supply of new lawyers and protect elite professional interests (needless to say, a much less benign account). For an excellent, concise summary of the history of lawyer regulation, see Benjamin H. Barton, The Lawyer-Judge Bias in the American Legal System ch. 5 (Cambridge U. Press 2011).
History here is centrally important, but even as we home in on a historical explanation for the scheme of licensure and credentialing that has, upon reflection, been in place for a very long time, the question arises of whether, and to what extent, this system makes sense in our modern world.
There is a groundswell of really terrific, and steadily more influential, work by scholars and other seasoned professionals that questions the efficacy of the modern bar exam. See, e.g., IAALS, Building a Better Bar: Capturing Minimum Competence. By efficacy here I mean the connection between what is being tested and what matters for the success of newly-minted law graduates. Beyond efficacy, there looms large the question of whether the consequences of state-specific bar exams on the racial and ethnic diversity of our profession—which, to be crystal clear, are very negative and not seriously improving—warrant a continuing commitment to business as usual.
To be sure, there has been a steady move over the past several years to the Uniform Bar Exam (UBE). Arguably, the rise of the UBE suggests that the federalism approach is sufficiently adaptive. And I certainly agree that the UBE, now adopted by thirty-seven states, has been a salutary development. Other than the rueful “what took you guys so long?,” we can and should applaud and admire the states willingness to embrace the UBE in an effort to acknowledge the national, rather than the regional, character of legal practice and, importantly, of modern legal education in the U.S. (Query: how much has UBE adoption been driven by the economics of developing and grading a state-specific bar exam?)
And yet we can still worry, and many of us do. Why?
- First, a significant number of states have not adopted the UBE as of this writing, including California and Florida, to mention just two large population states. Today it remains uncertain whether they will.
- Second, we are all watching developments in New York, where there seems to be some appetite for rolling back the UBE. See Sam Scolnik, “N.Y. Should Withdraw From Uniform Bar Exam, State Bar Group Says,” Bloomberg Law, June 14, 2021. This would be an enormous setback for the wider UBE movement.
- Third, fifteen states that have adopted the UBE require examinees to take a test that covers jurisdiction-specific information. See Map of UBE Jurisdiction-Specific Requirements. That a good number of states require students to jump through additional hoops, hoops which are based upon the persistent belief that new lawyers need to understand local rules.
In sum, we need to be careful in identifying the UBE with a truly national bar exam.
Beyond the matter of the content of the bar exam, there is the question of how it is administered. This was a fairly mundane question until the time of COVID-19. As the pandemic raged, states confronted deep concern on the part of examinees with an in-person bar exam. States scrambled, in the face of accumulating scientific evidence that crowding dozens or maybe even hundreds of folks into a hall to take the bar exam was irresponsible. These choices were made by individual states without any central interference. The ABA’s only meaningful response came late in the summer, when many of the bar exams had already been administered. See Stephanie Francis Ward, “States should postpone in-person bar exams during COVID-19 pandemic, ABA House says,” ABA Journal, Aug 4, 2020.
As a result of incredibly intense, and courageous, student advocacy and support from key scholars from around the country, some states pivoted quickly to online administration. There were some predictable and vexing problems with this tech-heavy solution, but surely it was an improvement over superspreader bar gatherings. See “COVID-19 and the February 2021 Bar Exam,” The Bar Examiner, Spring 2021 (providing recap of the wide variation of summer bar exams).
Another approach was the adoption of a diploma privilege for 2020 graduates. A small number of states effectively waived the bar exam for this cohort of students. See Stephanie Francis Ward, “Jurisdictions with COVID-19-related diploma privilege are going back to bar exam admissions,” ABA Journal, Dec 10, 2020. While this was an intriguing development, it seemed as the dust settled to be more illuminating as an example of the extraordinary intransigence of state bar leaders. Heck, if a state was not going to revisit its rules to permit a one-time diploma privilege for graduates in the midst of a monumental health emergency, when would it ever?
There is more to say about the matter of the #barpocalypse (credit Professor Cat Moon of Vanderbilt Law for this phrase) of last year. And there is much more to say about the trials and tribulations of the UBE movement. But what I want to do mainly is to bring to this larger discussion an exclamation point: state regulators (the bar examiners plus the state bars and state supreme courts they answer to) have moved ever-so-slowly in adapting new strategies and structures for lawyer licensure. And in the case of #barpocalypse, these pods of state-level regulators mismanaged a serious crisis.
One final observation with regard to bar federalism and licensure: We are in a moment in which there is a building voice of impassioned stakeholders, from across a range of ideologies and locations, to replace the traditional bar exam with something very different. The diploma privilege movement remains vigorous. See, e.g., Natalie Runyon, “Exploring diploma privilege and alternatives for attorney licensure,” Thomson Reuters Government Solutions, Apr 13, 2021. As recently as last week, an important statement emerged from a task force in Oregon, this suggesting a promising pathway to licensure that obviates the bar exam. See Stephanie Francis Ward, “State supreme court asked to consider new licensure paths for lawyers,” ABA Journal, July 1, 2021. So perhaps there is some momentum for this change.
Unauthorized practice of law (UPL) and non-lawyer investment in law firms
The United States is deeply connected, for historical reasons that span many countries, to other countries which follow the common law. As a result, legal services reforms that have emerged in the United Kingdom, Canada, Australia, and some other common law countries have righty caught our eye, just as the reverse is true.
A deep and broad account of legal services regulation and the structure of legal education will see a number of common elements and resonant themes among these systems. The differences are important, to be sure, but we should be prepared always to acknowledge the profound connections among these common law nations, connections which illustrate why it is not so peculiar, for example, to see the ABA hold its annual meeting in London or Toronto, or to see a stream of students coming from the U.S. to other common law countries and vice versa.
However, the powerful resistance to change in our law of lawyering and the structure of legal services regulation is illustrated well in at least these two ways:
- The persistence of “unauthorized practice of law” regulations in every American state, which is in contrast to the absence of any such requirement in the U.K, and
- The prohibition of non-lawyer investment in U.S. law firms, which is quite distinctive from the choice made by the U.K. over a decade ago in its Legal Services Act. See Post 105 (summarizing the U.K. reform timeline).
There is much to say by way of an analysis of these two pieces of the regulatory puzzle, and in a longer exegesis on this topic I would say more. But for the purposes of this discussion, let me say a few things relevant to my general thesis about Our Bar Federalism.
First, as to the phenomenon of UPL, it is quite problematic that states have developed their own standards of what is, or is not, authorized legal practice without a serious interrogation into the purposes and objectives served by restricting access to legal advice and representation. Others could and will quarrel with this claim; they will point to a body of caselaw (not many cases, though) that sort out what is unauthorized practice and say that these doctrines illuminate well the requirements. Having read most of these cases, color me skeptical.
Or they will point to the ABA Model Rules of Professional Conduct. Also not persuasive. The ABA has been fairly clear in insisting that the contents of UPL are for states to decide. Here is the key language from comment 2 to Model Rule 5.5:
The definition of the practice of law is established by law and varies from one jurisdiction to another. Whatever the definition, limiting the practice of law to members of the bar protects the public against rendition of legal services by unqualified persons. This Rule does not prohibit a lawyer from employing the services of paraprofessionals and delegating functions to them, so long as the lawyer supervises the delegated work and retains responsibility for their work.
Other than what is contained in the last sentence, this dealing with supervision and responsibility, Rule 5.5 leaves the definition of what is the “practice of law” to individual states.
All told, we have ubiquitous UPL restrictions, but stakeholders must search far and wide to discover the content and contours of these restrictions. Some have advocated for the wholesale repeal of UPL restrictions, pointing to the connection between such restrictions and the persistence of the lawyers’ cartel. See, e.g., George C. Leef, “‘Lawyer Fees Too High?’ The Case for Repealing Unauthorized Practice of Law Statutes,“ Regulation, vol 20, no. 1 (Cato Institute 1997). And the enthusiasts of UPL in the U.S. point to the emergence of Legal Zoom and Rocket Lawyer, as well as online legal documents, and decry the steady decay of UPL regulation.
But before this obituary is written, it is important to recognize that UPL functions in the U.S .as a meaningful risk for alternative legal service providers. Legal Zoom’s budget to fend off UPL suits is in no way analogous to the predicament of small start-up companies, including many access-to-justice entrepreneurs of various stripes. For them, the presence and persistence of UPL is not an abstraction, but a real fact of life. These individuals must navigate the scheme of UPL regulation, which is balkanized and profoundly so. Further, it is sure to stay that way because (a) the drafters of the Model Rules are not interested in clarifying the law; (b) there is no crafting of so-called federal common law (more on that in a later post), and (c) federal legislation is an enormous lift that would need to overcome the world’s most sophisticated lobbyists followed by a decade or more court challenges, at least some of it grounded in principles of federalism.
As to non-lawyer investment in law firms—sometimes referred to as “alternative business structures” or ABS—the gulf between U.S. regulatory intransigence and important reform in Canada, Australia, and the U.K. is remarkable.
The example of the Legal Services Act of 2007 is particularly significant, given both the importance of the legal market in the United Kingdom and because of the longstanding connections between our two countries. The Legal Services Act removed the principal impediments to non-lawyer investment in, and ownership of, law firms. This decision was reached after careful reflection and study, with the input of leading U.K. legal services regulation scholars who looked closely at the evidence and the legal services landscape. Various studies since the Act’s adoption have supported this movement. See, e.g., Center for Strategy & Evaluation Services, “Impact Evaluation of SRA’s Regulatory Reform Programme,” April 2018.
“The truth is simple. ABSs in England and Wales is not a fly-by-night operation, conducted behind closed doors by rapacious capitalists, arriving in the legal market to strip profits and eviscerate ethics. Instead, since reforming its regulations, the England and Wales legal system has seen steady improvements in its legal market. . . These include more choice for consumers, more technology to help increase access, and more opportunities for solicitors to offer their ethical expertise to clients.”
Passmore & DeMeola, “US Legal System Can Benefit From Nonlawyer Ownership,” Law360, Feb 16, 2021.
And yet the opposition persists! The ABA has been especially resolute in its resistance to change or, indeed, any experimentation that might illuminate the advantages of such change. Model Rule 5.4 has been adopted by nearly every state, and even the adaptations present in Washington D.C. (designed to facilitate lawyers being partners with lobbyists) are viewed as essentially modest.
Further, the ABA has been resistant to any experimentation by any state. In a bizarre example of the ABA’s loathing of any consideration of change, influential bar leaders attacked a 2020 resolution from the ABA Center for Innovation encouraging state reform experimentation, see Resolution 115, because it did not specifically rule out reconsideration of Rule 5.4. They were successful in inserting this language, which has essentially defanged innovative regulatory reform emerging from the ABA. Cf. Post 140 (Henderson heaping derision on Resolution 115, asking “What exactly did Resolution 115 accomplish? Basically, it recommended that other lawyers get together to study, collect data, and solve very difficult problems related to cost and access to justice,” and appropriately zero dollars for the cause).
Not content with the defanging of the text of Resolution 115, which clarified that the resolution would not be read to encourage states to in any way disturb Rule 5.4, bar leaders—including members of the so-called “Five Bars,” whose members (including New York) have become renowned for blocking any serious efforts at regulatory reform—insisted on excising any language in the report accompanying the resolution that spoke favorably about reforms that would permit nonlawyer ownership in law firms. This included Justice Neil Gorsuch’s endorsement of reform in his recent book.
Disclosure: I served as chair of the ABA Center for Innovation and therefore participated in the drafting and advocacy of Resolution 115, at least until I came to view the adoption of the resolution was essentially worse than doing nothing.
All of this is a rather sorry ending to the encouraging movement from several years ago led by William Hubbard and Judy Perry Martinez, two extraordinary visionaries and bar leaders, which brought into being the Commission on the Future of Legal Services and the ABA Center for Innovation.
The story happily does not end here. Utah is in the midst of its important regulatory sandbox, with experimentation in the areas of both non-lawyer law firm investment and, subject to certain conditions and rules which are described here. See Sara Merken, “New legal services rules make waves in Arizona and Utah as other states weigh reforms,” Reuters, Mar 19, 2021. The jury is still out, and this is exactly as it should be, given the commitment by the folks leading this effort to data-driven, evidence-based analysis and reform.
Arizona’s reform efforts are both bold and exciting. See, e.g., Maddie Hosack, “Arizona Carries Regulatory Reform Momentum Forward with Historic Vote,” IAALS Blog Updates, Sept 22, 2020. They cover a wide swath of legal services regulation and bar leaders and other stakeholders, with the blessing and indeed active involvement of its supreme court, are working hard at change. Reform efforts in other states (here, here, and here) are in various stages of consideration as well. See, e.g., Andrew Arruda, “The Story So Far: California Regulatory Reform,” IAALS Blog Updates, Feb 4, 2020; Crispin Passmore, “Florida follows Arizona and Utah and moves ahead of the rest,” Passmore Consulting, June 30, 2021.
There is every good reason to be enthusiastic and optimistic about these reform efforts. No lawyer has seen in his or her lifetime the same energy for, and the possibility of, significant reform in legal services. As described above, there is some cautious optimism, too, for reform in our system of lawyer licensure. And, while I have not discussed this in detail here, there is movement afoot in the schemes of law school accreditation, including potential changes to curricula, testing, and modes of delivery.
Finally, I can imagine, and here I hope I am not looking through a glass darkly, some changes in our structure of lawyer mobility—one of the more pernicious aspects of our bar federalism—whether brought about by growing commitment to reciprocity, litigation under the Dormant Commerce Clause and/or Privileges & Immunities of citizenship, Congressional action, or some combination of all of the above. COVID-19 has brought changes in how medicine is delivered, and some natural disasters in recent years has even caused adjustments in the rules governing lawyers practicing in states in which they are not admitted. These changes may well become sticky.
And yet I want to stress a note of strong caution. These reform efforts presuppose that the present structure of state-by-state regulation is impervious to change. Let’s face the brute fact that even significant reform in the half dozen or so states that have embarked on these reform journeys in the past three or so years will cover only a small part of the U.S. population.
Eyes are rightly trained on California, our largest state and a state whose legal economy has effects, intended and unintended, on other states. The reform process there has been turbulent, and with respect to UPL writ large and lawyer licensure as touched upon above, basically non-existent.
And New York? They have been a nearly relentless force AGAINST change, famously beating down efforts at reforming Rule 5.4 and, a decade earlier, multidisciplinary process. One of the iconic figures of this resistance, Mr. Lawrence Fox, a lawyer of extraordinary distinction to be sure, but someone who apparently has never met an access-expanding, technology-related reform he has not vigorously opposed, is being awarded the ABA Medal this year. Can we seriously expect New York to lead the way?
In sum, a scenario of convergence, with the most important states leading the way, is hard to imagine. Whether it is easier to imagine a federal solution, or some sort of hybrid, will be the focus of a later post.
In Part III of this four-part series, I want to focus on some of the normative considerations that go into the structure of our bar federalism. This scheme is highly problematic, for reasons described at various junctures in Part I and II. In Part III, I will continue to focus on some of these noxious consequences.
However, to understand where we are, and to comment usefully on where we ought to be going, we need to reflect in a clear-headed way on some of the positive elements of our legal services regulatory ecosystem—what I will call the federalism values that are at work in this space.