A prescription for a wicked problem.
Parts I ( 239), II (240), and III (245) of this series have canvassed the matter of balkanized legal services regulation. While not a comprehensive review of all dimensions of this large, complex system, I have drilled down to some of the examples of this phenomenon. And, in Part I and, especially, in Part III, I describe some of the regulatory pathologies that emerge from a system that is configured in such a balkanized way, pathologies that are problematic from a consumer welfare perspective but are deeply entrenched.
As I wrap up this series, I sketch some of the ways in which we might reimagine our federalism, and in ways that create at least the potential for significant regulatory reform.
What are the objectives of legal services regulation?
We should start with an assessment of the objectives of legal services regulation.
In her masterful book, Rules for a Flat World (2016), economist and lawyer Gillian Hadfield makes the compelling case for “market-induced innovation in regulatory design.” The take-away of her dense, and deeply informed analysis is that regulation so often fails because it entrenches incumbent interests and, further, is seldom evidence-based.
While there is no obvious off-the-rack solution, the various pieces of a promising strategy must attend to incentives and to the liberating effects of markets and competition. Effective re-regulation (not deregulation per se, but the best reform, she argues, includes important elements of deregulation) requires an admixture of private regulation and sensible government oversight.
“The greatest promise of market-induced innovation in regulatory design,” Hadfield argues, “is a much-improved understanding of the relationship between the complexity of a regulatory setting and the complexity of regulation.”
So, herein lies a set of objectives, objectives that even at this rather high level of abstraction, can help us in organizing regulatory templates.
Another helpful set of objectives has been captured by the ABA in its model regulatory objectives. This policy grew out of the work of the Commission on the Future of Legal Services, on which I had the privilege of serving. In 2016, the ABA House of Delegates adopted this policy, thus recommending that these objectives be followed by every state in regulating legal services:
A. Protection of the public
B. Advancement of the administration of justice and the rule of law
C. Access to information about, and advancement of the public’s understanding of, the law, legal issues, and the civil and criminal justice systems
D. Transparency regarding the nature and scope of legal services to be provided, the 11 credentials of those who provide them, and the availability of regulatory protections
E. Delivery of affordable and accessible legal services
F. Efficient, competent, and ethical delivery of legal services
G. Protection of confidential information
H. Independence of professional judgment
I. Accessible civil remedies for breach of duties owed and disciplinary sanctions for incompetence, misconduct, and negligence
J. Diversity and inclusion among legal services providers and freedom from discrimination in the delivery of legal services and in the justice system
Taken as a whole, these objectives provide a worthwhile framework for considering the values and purposes of regulation, here focused principally on the regulation of lawyers, but also sensibly viewed as a basis for evaluating other aspects of legal services regulation, including the regulation of firms, alternative legal service provides, the admission of new lawyers, and even law schools.
Reforming within a federalist system
When we consider these overarching goals a regulatory system, we can see in even sharper relief the difficulties associated with our bar federalism. Beginning with the ABA’s regulatory objectives, every one of these goals is consistent with efforts to reform regulation at the state level, and indeed the ABA speaks in this policy directly to state high courts. And yet difficulties emerge when we consider how variation in state regulation emerging from a potential regulatory race to the bottom can undermine some of these key goals.
For example, Goals E nd F—the first speaking directly to access to justice and the second to efficiency, competency, and ethics in legal services delivery—are impacted surely by how schemes in other states operate. So, to take a homely example, consumers can benefit from widening access to legal services by enabling out-of-state lawyers and alternative legal service providers to provide advice and representation. This is especially likely when consumers can have access to technology-based service solutions that do not require the intervention of lawyers in any event. We could, but won’t here, work through some of the other regulatory objectives to illustrate the same point.
Market-based regulation requires, as Hadfield explains, appropriate governmental oversight. And she points to the UK and the Legal Services Act 2007 as an example of sound regulatory architecture. The reforms ushered in the LSA and the other reforms less widely noted, but nonetheless important, including in Australia, Singapore, and parts of Canada, are all the product of central government authority and implementation.
The governmental oversight that would ensure that there is a baseline of adequate consumer protection is hard to contemplate without some central authority. To be sure, the ABA can, does, and should promote common solutions and convergence on regulatory policy. However, ABA model rules seldom confront directly the incentives structure of state regulatory authorities. Nor do they touch at all (unlike the LSA, which created a new regulatory body) the durability of lawyer self-regulation.
Is competition among states a possible fix?
Apart from oversight, effective regulation might emerge from the introduction of competitive regulatory models. “The real monopoly problem,” Hadfield notes, “is not that individual lawyers and law firms don’t have competitors. It is that the system lacks competitors.”
There is real potential for competition among states, and the emerging, yet still tentative, efforts of a few western states to reform their systems, might augur a world in which alternative regulatory models are created by justices, bar examiners, and other regulatory authorities and, further, these models are assessed by other states with an eye toward converging on the “best” model. This is the most optimistic version of Bar Federalism.
Thus, there is a story we can tell about the adoption of the Uniform Bar Exam (UBE), discussed in Part I (239) that suggests a plausible route toward a common system. Suppose that regulatory convergence becomes more of a commonplace, and that, say, ten years from now we see a much more limited menu of regulatory schemes across the United States. Moreover, it is critically important that states have the space to innovate. Such space is limited, as I have explained in Part II (240), because of the pressure waged by the ABA to restrict pro-market initiatives, such as nonlawyer investment in law firms (prohibited by Rule 5.4) and alternative models of legal education (prohibited by the ABA’s law school accreditation standards).
In sum, facilitating competitive regulatory standards requires both market-promoting initiatives and foregoing edicts and other discouragements of innovation. It’s hard to see how we get there.
Consumer protection without anticompetitive results
Even with market-based regulatory initiatives, there remains the matter of consumer protection. The principal task of a central authority in this space, for example, a federal administrative agency, is to ensure that an appropriate base level of consumer protection is maintained and, further, that the states do not engage in serious anticompetitive results.
We have ready analogies for how to go about constructing a federal regime of supervision, looking, for example, at the Federal Trade Commission and the antitrust division of the Department of Justice, supplemented by limited private rights of action.
My point here is not to endorse a certain model of what federal regulatory oversight would look like, but rather to suggest that there are models of structural change available that can help illuminate what legal services regulation might look like if it were not so balkanized. Further, we can see better how impactful reform can develop more effectively when there is not, squarely in the way, the vexing dilemma of convincing fifty separate state courts to move in a singular direction.
Are the needs of legal consumers in, say, Texas profoundly distinct from those in Kansas or Colorado? Experience tells us that some cohort of lawyers will answer this question in the affirmative, suggesting that balkanized self-regulation is about as challenging as it gets.
Conditions necessary for a solution
The reconfiguration of our persistent scheme of bar federalism requires as necessary (even if not sufficient) conditions the following:
1) Confronting the conflict of self-regulation.
Foremost, we need to adapt, if not consider displacing, the halcyon tradition of lawyer self-regulation in light of the realities of regulatory decision-making and reform. The brute fact is that lawyers can be and often are viewed by the public as both parochial and protectionist. This view doesn’t come from nowhere. As I discussed in Part II (240), the incentives for such behavior are ubiquitous,
Legislators in the UK understood the danger of lawyer self-regulation and sought to address it with serious reforms in the LSA. Emerging reform in other parts of the world echo the concern that foxes are not always the best guardians of henhouses and, in any event, the complexities of modern technology and globalization require attention by policymakers of more diverse backgrounds and perspectives than those on offer by judges and lawyers.
2) Lawyer organizations, including the ABA, need to step up
We must rely on organizations that can and should assist in developing comprehensive models of and approaches to regulation, as this is critical to advancing the objectives of more sensible, less balkanized regulation.
The ABA is well-positioned to undertake the large task of propelling legal services reform. While lacking any formal authority to regulate legal services, the ABA, as the principal association of lawyers and as an organization broadly representative of the profession as a whole, could and should tackle squarely the problem of balkanization.
The ABA should work constructively with state supreme court justices and bar authorities to foster common and collaborative approaches, and they should reinforce innovations that are welfare-enhancing, through their continuing work at developing model rules. Internal difficulties within the ABA, including serious financial challenges, have reduced appreciably their importance as an organization that speaks unquestionably for the profession as a whole. We can hope, and maybe even expect, that these difficulties will prove temporary.
As a matter of historical fact, the ABA has often neglected to take a more pronounced interest in significant reform to legal services—reform that would improve access to justice. The problem is seldom the rhetoric on the part of leadership. Rather, the ABA is designed to be incredibly slow-moving, with a byzantine web of processes and traditions that can hobble major, rapid reform. Moreover, there are very formidable anti-reform forces within that organization, forces which view the ABA as much more in the nature of a lawyer-protecting trade association, rather than as a vehicle for improving the delivery of legal services to We the People.
Ultimately, it is a vision of the ABA as an imaginative, resourceful, and courageous organization that I have in mind when I suggest that it could be an extraordinary help in dismantling the worst elements of our balkanizing system and creating more efficacious mechanisms at regulatory reform, and not the ABA as presently configured and with a mixed performance record in the regulatory improvement sphere.
3) Engagement at the federal level
Meaningful efforts to reduce the more noxious elements of bar federalism will require ambitious efforts on the part of Congress to enact legislation that improves legal service delivery.
This need not be broadly preemptive legislation, assuming for the sake of argument that federal authority to displace some or much of the edifice of lawyer self-regulation by state judiciaries is constitutional under Article I of the Constitution. Rather, the most successful solutions require, I would suggest, more measured, yet still creative, methods at improving legal services, methods that involve collaborations between the national and state government.
Collaborative federalism is a familiar mode of regulatory governance, and many aspects of our economy are subject to such approaches. We would do well to adapt our systems of collaborative federalism to solve wicked problems that arise from our legal services ecosystem, understanding that such adaptations mean sacrificing the hoary tradition of state judicial discretion to handle these matters in the old-fashioned way.
4) Doctrinal innovation in constitutional law
We should welcome some appropriate amount of doctrinal innovation in our constitutional law. This includes both federal and state constitutional law. As to the former, we should think seriously about using the Dormant Commerce Clause and maybe even the Privileges and Immunities Clause to scrutinize more carefully state regulation that has the purpose and the effect to protect lawyers from out-of-state competition.
Historically, the federal courts have been reluctant to intervene in the area of legal services regulation and, in some dicta, have noted that lawyer self-regulation is a prerogative that goes to the heart of the state judiciary’s role in protecting the justice system and is not, by contrast, a kind of economic regulation of the sort generally subject to constitutional scrutiny.
This is an anachronistic way to look at this matter, as legal services regulation is, indeed, economic regulation. Just as state authorities are well capable of examining some of the unique features of lawyer and legal services regulation, so too are federal courts capable of appreciating this nuance.
State constitutional law should be adapted as well. The problem of balkanization is, to be sure, not mainly one that stems from state constitutional doctrines that may seem errant, as for example the separation of powers rationale many state courts have invoked for protecting the prerogatives of the judiciary to regulate lawyers and basically everything else that relates to legal services. However, if and insofar as state courts acknowledged a greater role of the state legislature and governors in creating and implementing regulation of legal services, then we might see some willingness of state authorities to look at the wider valance of legal services and they impact not only the welfare of lawyers and judges, but also the welfare of consumers.
Staying with this hopefully-not-too-fanciful thought experiment, it might follow that more sensible schemes of regulation emerge and even converge among the states.
5) Look at the data
Finally, there ought to be a scrupulous commitment among all seriously engaged in legal services regulation and its potential reform to data-driven, evidence-based solutions.
Throughout our profession, we suffer from a lack of adequate information and a dearth of research. As a result, we are hard-pressed to evaluate effectively the present structure of our legal services system and, as well, regulatory experiments that are undertaken by one or another state. Progress is being made, happily, on both fronts. There are emerging efforts to collect comprehensive data and in a transparent and collaborative way. Organizations like IAALS and NCSC have been leading the way.
Much more progress is needed, but there has been improvements. And there is more research being done, including by some ably empiricists and consortia of scholars, in this area. The future is promising, but the pedal needs to be pushed to the metal. There must be mechanisms in place to assess both the case for and against change, retail and wholesale; and, likewise, there must be mechanisms to evaluate experiments, whether carried out at the state or national level.
Part IV is no more than a sketch of some possible future, a future that looks forward to the erosion of a system of bar federalism that has stood in the way of beneficial change.
As noted in Part III (245), we should be careful to not throw the baby out with the bathwater; that is to say, there remain important values associated with state-level regulation of lawyering and legal services regulation. So I am not misunderstood: I am not calling for a comprehensive federal response in the form, for example, of a new national agency responsible for the regulation of lawyers and lawyering, and of other mechanisms that are part of our system of legal services delivery. There are many reasons to be skeptical of federal interventions, even though I have not detailed there here.
Still and all, our long tradition of leaving these matters squarely in the hands of states and, in particular, state judges have created major impediments to the regulatory reform agenda. We would do well to think creatively about our present predicament, how we got to where we are, and how we might develop creative solutions to facilitate change that matters.