Prediction on State of the Legal Industry Validated

In the spring of 2019, High Performance Counsel asked its #ThinkTank Faculty, of which I was a part, their wildest prediction for the state of the legal industry through year-end 2020.  I predicted that non-traditional legal service providers would double their share of the legal services market and force law firms to rethink how to work efficiently and provide better value to clients.[1]  While my prediction may not have been 100% accurate (yet), we have certainly seen recent important developments that are moving the legal world in the direction I predicted.

On August 27, 2020, the Arizona Supreme Court announced amendments to its rules of professional conduct that had previously barred nonlawyers from having an economic interest in a law firm or from sharing fees from a case or group of cases.  With the intention of expanding access to justice, the Supreme Court repealed the prohibitions in Rule 5.4 of the rules of professional conduct.  This allows three new practices in Arizona that were previously prohibited: (1) Lawyers may form partnerships with nonlawyers that provide legal services either in whole or in part to clients; (2) Corporations may employ lawyers who will provide legal services to the public; and (3) Lawyers may share fees with nonlawyers in exchange for capital investment or financing of a case or group of cases.[2]

Earlier that month, the Utah Supreme Court made similar changes to its ethical rules that will allow nonlawyer ownership or investment in law firms during a two-year pilot period.  The court said these changes represented “perhaps the most promising effort by courts to tackle the access-to-justice crisis in the last hundred years.”[3]

As more states allow legal service providers – in various novel forms and with access to new capital sources – to rethink how best to provide legal work to the public, traditional law firms will need to start thinking creatively to keep up with this new potential for competition.  Though still only in the early stages of development, the tides certainly seem to be moving in the direction of nonlawyer investment or ownership in the provision of legal services.  And the implications for the legal industry as a whole, and the litigation finance market in particular, cannot be overstated.  In addition to the goal of providing better access to justice for clients, these changes should support investments in new technology to improve the ways in which lawyers do their jobs.  I’ll take that as a win for my “wildest prediction” from 18 months ago.

Footnotes

[1] https://www.curiam.com/firm-news/hpc-thinktank-wildcard/

[2] For a more detailed discussion of the implications of these rule changes from a legal scholar perspective, see this Law360 article: https://www.law360.com/articles/1313678/a-likely-tipping-point-for-nonlawyer-ownership-of-law-firms?ts_pk=5dd51f34-701e-42a8-9022-b87910b18d42&utm_source=user-alerts&utm_medium=email&utm_campaign=tracked-search-alert

[3] Find a more detailed discussion of these changes here: https://www.abajournal.com/web/article/utah-embraces-nonlawyer-ownership-of-law-firms-as-part-of-broad-reforms