Are there upsides to a federalist system of lawyer regulation?
Having beaten the drum about the problems of balkanization in legal services regulation in Parts I (239) and II (240), I want to turn to the question of bar federalism from a more nuanced (dare I say, scholarly?) perspective.
What are the consequences of the balkanized scheme we have long had in place? We cling to a system that leaves the most fundamental matters of legal services regulation, including licensure, lawyer mobility, legal ethics & discipline, law school accreditation, and non-lawyer ownership, to individual states to regulate as they each see fit.
Separate and apart from the content of any specific regulation, a balkanized system has three inherent risks: parochialism (regulators aren’t reliably taking in information from the broader world); protectionism (local lawyers are purposefully favored); and layers of local complexity and add-ons that impede market forces (e.g., unique requirements to sit for the bar) . Many would agree, there is a lot not to like about our current patchwork system.
Yet, what is the upside to a largely federalist regulatory approach? We owe this a clear-eyed lock. This is the subject of Part III.
The case for Bar Federalism
There are, as I see it, four strong reasons for maintaining a system in which our fifty states are responsible, with little by way of federal intervention or control, for regulating legal services.
The first two are centrally about consumer protection, the third is derived from our constitutional tradition and doctrine, and the fourth and final one—to me, the most interesting and persuasive—is connected to the fabled idea that states are laboratories of experimentation. Let us consider each in turn.
1. State regulators will be held more accountable
Legal services regulation has, as its most fundamental objective, the protection of the public. Consumer well-being and the assurance that lawyers are acting consisting with the public interest is a sacrosanct principle. Indeed, we can go so far as to say that it is the only legitimate purpose of interventions to restrict what would otherwise be unfettered conduct by individuals who make their services themselves available to the public.
Licensing of the professions has long been tied to consumer protection. See, e.g., James Bessen, “Everything you need to know about occupational licensing,” Vox, Nov. 18, 2014 (noting “quality and safety” as the perennial rationale for licensure). Likewise, ethical rules and the standards governing law schools and individuals purporting to engage in giving legal advice or, more ambitiously, representing clients as so-called alternative legal service providers are framed around the imperative of protecting consumers from the risks of unscrupulous and incompetent purveyors of services.
It is intriguing, but largely lost, aspect of our history of economic regulation that legal services were not swept into the larger category of trade subject to national administrative regulation under the early federal trade regulation statutes. which are now more than a century old. See Federal Trade Commission, “Our History” (discussing the passage of FTC Act in 1914). Professional licensing, by contrast to the regulation of goods and other services, has been durably viewed as a matter of state regulation. Thus, states have created boards, agencies, and commissions tasked with setting up licensing schemes. With respect to law and lawyering, as we have discussed previously and as is familiar to Legal Evolution readers, see, e.g., Post 140, the relevant agencies are under the rubric of the state high court.
The underlying rationale for this scheme must be that these state regulators are in the best position to ensure that consumers are protected. We start with that premise.
But why does it follow that these regulators should be divided up among the states? What is the nexus between this scheme and the consumer protection rationale? Below is a plausible set of justifications.
Foremost, these regulators are accountable to the public and, all things considered, greater accountability is likely to occur when there is a smaller base of consumers and voters who would guard the guardians. For all the criticism lavished on our system of judicial elections and the majoritarian character of state judicial behavior (which is contrasted with the deliberately independent structure of the federal judiciary), one of its signal advantages is that it ensures that judicial activities will be subject to electoral control.
Thus, it could be reasonably argued that with respect to oversight over lawyering and legal services, elected state judges are more accountable to the people, the very same people whose interests and welfare are affected by lawyers and legal services providers. It is hard to imagine that the federal government would provide anything equivalent by way of accountability; nor can we view an avowedly national standard-setting organization such as the ABA comparable in this respect either. So, we can see that the same logic that undergirds arguments for robust federalism—that this fosters accountability of elected officials and therefore increases democracy and its values—might support bar federalism.
2. Better knowledge of local needs results in better regulation
A different argument for state-level regulation, one also yoked to consumer protection, is that lawyers and legal service providers who are not lawyers, must have adequate knowledge of local conditions and circumstances. A national regulator would be less able to ensure that legal professionals would have such knowledge, and, indeed, such a regulator may simply not care about protecting this value.
The tussle over the UBE and whether it ought to be supplemented, as many states have, with testing of local law, illuminate this matter. See Part I (239). So, too, does the requirement, common in the states but with uncommon standards, of continuing legal education. See “Continuing legal education,” Wikipedia (“No nationwide rules exist within the United States for CLE requirements or accreditation. Instead, each individual jurisdiction exercises discretion on how to regulate … CLE requirements”).
And even American law schools, which could largely develop and maintain a national curriculum, more often than not furnish students courses that focus on state law. This is done not only to assist students to become better prepared with subjects tested on the respective state bars but also because faculties and deans believe it their responsibility to provide adequate knowledge of specialized (read: state-specific) law and legal institutions.
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Let us consider these two consumer protection arguments for bar federalism before turning to the next two.
The accountability argument is hard to embrace on a reasonable assessment of the real world of state-level democracy and consumer choice. To the best of my knowledge, there is generally no serious effort to bring before voters questions of how state supreme court justices have undertaken their responsibilities to oversee the state scheme of lawyering and legal services regulation. Indeed, it is commonly said that state justices largely defer decisions of bar regulation to state bar authorities, intervening in the rarest of cases.
These bar authorities are not elected by ordinary citizen-voters, and it seems highly unlikely that voters would have information sufficient to enable them to hold justices accountable, in retention elections, for how they perform their bar administration functions.
This could change, to be sure, if, for example, legal services reform develops a serious head of steam, as it has in recent months in comparatively small states, such as Utah, Arizona, and Washington. Under those circumstances, it is not inconceivable that state voters could be mobilized to vote with an eye toward incentivizing their justices to act or not act in certain ways pertinent to legal services regulation. But, nonetheless, we should be realistic about how accountable in fact justices and bar authorities are to the people.
As for local knowledge, this is a large and complex issue. Surely it is advantageous for law students, new graduates, and even established lawyers to have some decent knowledge of local law. This is not the place to investigate how much law is properly viewed as local and whether students and lawyers require an especially intensive exposure to local law as they enter the profession (thereby requiring a substantial local law curriculum in law school) and continue as practicing lawyers.
More to the point of my subject here is whether such local knowledge warrants a distinctly federalist system. I would suggest that the better way to think about it is how we think, to oversimply somewhat, about the economic regulation more generally.
When we subject businesses, for example, to an occupational health and safety regulation, we expect the firm to be cognizant of federal, state, and local regulations. Except in rare cases, state and local regulation is additive; that is, the firm is subject to federal regulation as a baseline, and then whatever state and local governments add to this base. This makes sense from the perspective of imposing regulations that embody values established by Congress and federal agencies as national lawmakers while also bringing to bear more local values and circumstances.
Further, it makes sense insofar as businesses operate in an economy that is implicated by national, state, and local considerations and features. Even your local barbershop must take into account national values and interests (for example, the value of nondiscrimination based upon prohibited criteria and relevant health and safety rules), while also adhering to state (cosmetology licensing) and local (zoning) regulations.
There is no apparent reason why lawyering and legal services are entirely different animals. Indeed, the opposite would seem to be the case. After all, a client comes to a lawyer with a legal problem, and if it so happens that this problem implicates a mix of different laws, state and federal, a lawyer with a general practice license—which is to say, all lawyers, given how bar licensure works—should ideally be able to give advice and represent that client in any court or, failing that, be able to match this individual with another lawyer who has these skills.
All of this is to say that local knowledge, while pertinent, does not support well the idea that all regulations should be configured and administered by local authorities. As with modern American regulation more generally, the structure is an admixture of local and central features and implemented not infrequently by authorities at different levels of government.
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3. Value of constitutional federalism
A third value that may well undergird bar federalism is the grand value of preserving constitutional federalism. The core idea here is that our devotion to the principle of limited government and delegated authority, reflected in the structure of the U.S. Constitution and, especially, in the 10th amendment (“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”). This means that the role of the national government in regulating lawyering and legal services is, or ought to be, limited.
Perhaps our bar federalism flows from this classic, compelling view of limited national power. Yet, this is ultimately unpersuasive, given our contemporary constitutional law.
The federal government has a long tradition of imposing regulations on state governments and also on individuals and firms. The nexus typically is the power delegated to Congress in Article I to regulate commerce among states, a power given very broad remit over our nation’s history. See “Commerce Clause,” LII, Cornell Law. The Supreme Court has confirmed and repeatedly reinforced the principle that the national government, acting through Congress or through regulatory agencies exercising delegated powers, can regulate private conduct.
To be sure, important contemporary decisions of the Court have clarified that the commerce power is not a blank check for imposing Congressional will on state governments or private businesses. Four modern cases are particularly instructive in clarifying the limits to national authority. See United States v. Lopez, 514 U.S. 549 (1995) (Gun Free School Zones Act of 1990 not permissible on Commerce Clause jurisprudence); United States v. Morrison, 529 U.S. 598 (2000) (same regarding gender-motivation discrimination under 42 U.S.C. § 13981) Gonzales v. Raich, 545 U.S. 1 (2005) (federal government lacks authority under the Commerce Clause to regulate intrastate, noncommercial cultivation and possession of cannabis for personal medical purposes); National Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012) (Commerce Clause cannot be relied to uphold individual mandate in the Affordable Care Act, as it does not involve the regulation of commerce).
More pointedly, the Court has said unequivocally that Congress cannot commandeer state or local authorities to enforce federal law. See Printz v. United States, 521 U.S. 898 (1997) (striking down provisions of the Brady Handgun bill on grounds that federal government has commandeered local sheriffs to implement federal policy, in violation of the Constitution); New York v. United States, 505 U.S. 144 (1992) (striking down provision of Low-Level Radioactive Waste Management Act because Congress has commandeered state to implement federal policy, therefore violating the 10th Amendment).
None of these cases, however, provides meaningful support for a restriction on the national government’s authority to establish rules pertaining to law practice or legal services delivery.
The claim that federal regulation would interfere with the prerogative and role of the state courts seems especially weak. Yes, Congress must respect, under the separation of powers, the independence of the Article III judiciary, but this has no bearing on the relationship between Congress and the state courts. To put it another way, the state supreme courts have no special immunity from federal authority under the Supremacy Clause, Art IV, ¶ 2, or any other provision of the U.S. Constitution, because they are courts. They are as subject to national authority, to the limits of the U.S. Constitution, as are any other office of state or local government.
Admittedly, this discussion of federal constitutional authority over the structure of legal services in the United States is abstract, as we are not considering a specific federal intervention. The law professor in me wants to equivocate here and say to the question “can we imagine a federal statute involving legal services that would raise constitutional problems?” maybe there would be. We can imagine the federal government going too far. The national government cannot do whatever it wants, in the name of creating a comprehensive scheme of legal services regulation.
For example, I think it would be constitutionally problematic if Congress were to enact a statute that gives carte blanche authority, without any guidance of any sort, to the ABA to create and implement mandatory standards for legal services. This may well raise concerns of unconstitutional delegation of powers. Moreover, it would raise problems under the Court’s commandeering precedents for Congress to enact regulatory standards and task state supreme courts with the responsibility of implementing and enforcing these federal rules.
But it is to the larger question that I want to direct these observations: Is our bar federalism justified by an ambient argument that states’ prerogatives to configure and administer their own regulations is properly shielded from federal power because the Constitution means to so shield them? The answer is clearly no.
4. Laboratories of democracy
So we come to a fourth and final argument for our balkanized world of legal services regulation. This is the notion that states should be encouraged to try out different schemes, to experiment, so that we can make a studied assessment of which standards are more or less efficacious. This model of states as “laboratories of democracy,” as venues for experimentation in a world of humility about which regulatory approaches would best work for We the People, is a familiar part of the narrative in the literature on American federalism. See Part I (239) (citing Justice Brandeis’s famous turn of phrase in New State Ice Co. v. Lieibmann, 285 U.S. 262 (1932)).
Even leaving aside the critique that such experimentation might result in a race to the bottom—a common but controversial argument to regulatory federalism—there are a couple of important problems with this argument in the context of our legal services economy.
First, legal practice is often carried out across borders, with functions, procedures, and expectations emerging from many state laws and legal institutions, and often with a national valence (even where truly federal law is absent). Thus, it is naïve to believe that we can effectively model and test a state innovation involving legal practice that will be uncontaminated by actions and processes that happen outside the state. Even if we tried hard to construct a hermetically sealed scheme for this purpose, we would be retreating to a fairly retrograde idea of law as emerging from, and impacting only, residents of one particular state. That is hardly consistent with the objective of the United States, to say nothing of the reality of our broadly interconnected legal system.
Second, the “laboratories of experimentation” idea supposes that we can and will collect data and evidence sufficient to enable us to converge on common solutions. The end goal is not to experiment to come up with an idea whose advantages will be captured only for the benefit of one state. At least that should not be our objective, even if we were tempted to be so parochial and selfish.
Yet this drawbridge mentality is a real risk in the area we are considering here. What institution, after all, would be trusted to take the results of these experiments and generate national solutions? I will consider this question in more detail in the final part of this series. But, for now, let me just observe with some pessimism that the various instances in which states have experimented with regulatory schemes have not yielded much by way of common solutions.
Tellingly, for example, the Model Rules of Professional Conduct, rightly viewed as one of the signal accomplishments of the ABA in establishing common standards for legal ethics and lawyer conduct, have functioned more by way of a one-way ratchet, with the ABA urging states to adopt the rules as a whole (as all now have, California being the last adopter), than a vehicle for testing different state regulatory experiments and reconfiguring one or another Model Rule in light of evidence emerging from states.
Here we have canvassed some plausible reasons for the persistence of our scheme of bar federalism. Hopefully I have given these arguments their due, and have evaluated with a reasonably fair eye. There may well be other reasons which I have neglected. But I would suggest that some decent burden falls upon those who argue for the maintenance of our current system, especially given what this system portends for efforts at revisiting and reforming the process of legal services regulation.
In Part IV of this series, I will come back to the core question of whether the system is broken. What are the costs and consequences of our balkanized scheme of legal services regulation? And I will sketch some tentative suggestions for how we might seriously improve our plight.