leGal Trends

New Laws Allowing Non-Lawyer Ownership of Law Firms

By ruBy l. PoWers

The concept of non-lawyer ownership of law firms is foreign to most in the United States, but recent court rulings in Utah and Arizona have us rethinking this standard, partly in response to calls for criminal justice reforms, innovation, and increased access to justice concerns.

Arizona was the first state to allow nonlawyers to own law firms. They will allow legal paraprofessionals (LPs) to provide limited legal services to the public, including going to court with their clients. LPs will be able to practice in administrative law, family law, debt collection, and landlord-tenant disputes, with limited jurisdiction in civil and criminal matters.1

Utah followed soon after with changes that allow non-lawyers to own or invest in law firms with a two-year pilot program that will establish a regulatory sandbox for lawyers and non-traditional legal providers and services to test new ways of delivering and marketing legal services in a controlled environment.2 This includes entities with non-lawyer investment or ownership. The Utah court wrote “what has become clear during this time is that real change in Utahns’ access to legal services requires recognition that we will never volunteer ourselves across the access-to-justice divide and that what is needed is market-based, far-reaching reform focused on opening up the legal market to new providers, business models, and service options.”3

In other jurisdictions, Washington state “sunsetted” their Limited License Legal Technicians program that permitted non-lawyers to perform some legal tasks within family law. The Washington Supreme Court cited costs of sustaining the program and the small number of interested individuals for reasons to end the program.4

In July 2019, the California State Bar began considering allowing nonlawyers, as well as artificial intelligence (AI) programs, to legally “practice” law. Those against the idea argued it would impact the small and solo law firms who often serve the lower- to middle-class income markets5 defeating the access to justice argument.

If this change were to take place in more states, there could be a tipping point for many areas of law. For now, this will be an experiment in Utah and Arizona and potentially for Federal law practices like tax, patent, and immigration, depending on the details of the states that experiment in this arena.

From Lawline v. American Bar Association6 to Florida Bar v. Glueck7 and Reus v. Tilp 8, along with countless other decisions, the court has frowned upon nonlawyers forming a partnership with lawyers and sharing fees with non-lawyers. In each of these cases, parties have either shared the profits, jointly provided legal along with non-legal services to clients, or directly involved nonlawyers as alleged owners and operators of law firms. If we look beyond the United States, common law jurisdictions such as England and Australia have already taken measures to lift the prohibition on nonlawyer ownership.9 While innovation is invited in the hopes of modernizing and bringing the practice of law into the 21st century, some change may be too much for lawyers and law firm owners as well as impact the quality of service and disrupt the market.

Although to a lawyer this paradigm shift may take time to fathom, there are several benefits for non-lawyer ownership.10 One benefit includes a more diverse approach to thoughts and ideas of providing legal services from operations, marketing, and service delivery. It could bring out-of-the box thinking to a field in need of ingenuity. Second, this gamechanger could allow a more unique pool of employees and team members and incentivize those traditionally not in the legal field to enter with their expertise and capital. More importantly, the goal for those who tout this change is the increased access to justice. According to the World Justice Project, 77% of legal problems don’t receive legal help.11 At the same time, record-breaking unemployment rates, economic slowdowns, and reduced court services have only increased the barriers to legal services.12 Advocates for this change argue that the gap between those who are served and those who are not justifies trying to solve this matter in a new way.

As for the drawbacks of non-lawyer ownership, lawyers can see many initial problems, hence all the prior litigation and why this hasn’t changed on a widespread scale in the United States. A nonlawyer would have a steep learning curve in understanding the legal field they are in. The concern for professional independence for example, if non lawyers make legal decisions in running the law or are perceived of unauthorized practice of law, will be of great concern to the legal community and confusing to the nonlegal community.

In conclusion, what is the right answer? Amidst advancements in technology and societal shifts, it is hard to ignore the legal market’s climate is changing. The debate over the legal industry becoming available to non-lawyers has long been a point of contention. Ultimately, time will tell with this experiment. Arizona and Utah are pioneers in the pursuit of justice but also could be seen as disruptors in the legal field. It will take a few years to see the results of this experiment. When other states take notice of the results, they could ultimately follow and create a

whole new era of law firm ownership or if it fails, it will close the chapter on this trial for years to come.

Ruby L. Powers is founder of Powers Law Group, P.C., a full-service immigration law firm, and she is board certified in Immigration and Nationality Law. She authored AILA’s “Build and Manage Your Successful Immigration Law Practice (Without Losing Your Mind)” and provides law practice management consulting services to attorneys. She is a member of The Houston Lawyer editorial board.

endnotes

1. https://www.2civility.org/two-states-vote-to-allownonlawyer-ownership-or-investment-in-law-firms/ 2. https://www.2civility.org/two-states-vote-to-allownonlawyer-ownership-or-investment-in-law-firms/ 3. Moran, Lyle. “Utah Embraces Nonlawyer Ownership of Law Firms as Part of Broad Access-to-Justice

Reforms.” ABA Journal, 14 Aug. 2020, 3:45 PM CDT, www.abajournal.com/web/article/utah-embracesnonlawyer-ownership-of-law-firms-as-part-ofbroad-reforms. 4. https://www.abajournal.com/news/article/ washington-supreme-court-decides-to-sunset-pioneering-limited-license-program 5. https://www.glscap.com/how-will-changes-to-lawfirm-ownership-rules-affect-us-law-firms/ 6. Lawline v. American Bar Ass’n, 956 F. 2d 1378 -

Court of Appeals, 7th Circuit 1992 7. The Florida Bar v. Glueck, 985 So. 2d 1052 - Fla: Supreme Court 2008 8. REUS v. TILP, 2015 NY Slip Op 32025 - NY: Supreme

Court 2015 9. https://www.glscap.com/how-will-changes-to-lawfirm-ownership-rules-affect-us-law-firms/ 10.https://www.cohenwinters.com/new-laws-regardingwho-can-own-law-firms/ 11.World Justice Project, Global Insights on Access to

Justice, 2018 12.Clio Legal Trends 2020, page 6

The Supreme Court Broadens the Scope of Plain-Error Review (a Little)

By nelson s. eBauGH

For nearly three decades, the U.S. Court of Appeals for the Fifth Circuit held that a factual issue could not be reviewed for plain that he failed to show plain error.

The facts are relatively straightforward. Davis pleaded guilty to a federal felon-in-possession-of-a-firearm charge and a federal possession with intent to deliver narcotics charge. At the time of his federal sentencing, Davis had a state unlawful possession of a firearm charge and a state possession of marijuana charge pending against him. The state charges arose from conduct that occurred ten months prior to the commission of Davis’ federal offenses. Without any objection from Davis, the federal district judge ordered Davis’ federal sentence to run consecutive to any state sentences. On appeal, Davis argued that because his federal and state offenses were part of the “same course of conduct,” the federal district judge should have ordered the federal sentence and any state sentence to run concurrently with each other, not consecutively. Employing plain-error review, as directed by the Supreme Court, the Fifth Circuit held that it was not “clear or obvious” that Davis’ federal and state offenses were part of the “same course of conduct,” and affirmed Davis’ sentence.

In sum, the Davis holding may allow a criminal defendant to challenge an unpreserved factual issue when “findings are internally contradictory, wildly implausible, or in direct conflict with the evidence that the sentencing court heard at trial.”1 However, satisfying the plainerror standard remains difficult, “as it should be.”2

error. However, in Davis v. United States, 140 S.Ct. 1060 (2020), the U.S. Supreme Court concluded that “there is no legal basis for the Fifth Circuit’s practice of declining to review certain unpreserved factual arguments for plain error.”

Some background on plain error will help explain the significance of the Davis opinion. To begin with, plain error is often referred to as a standard of review. However, it is arguably not so much a standard of review as it is a doctrine applied by a federal appellate court to determine if an unpreserved error should be reviewed at all. If unpreserved error on appeal is plain, i.e., clear or obvious, a federal appellate court may correct the error if it affects the defendant’s substantial rights and seriously affects the fairness, integrity, or public reputation of judicial proceedings. Plain-error review is typically employed in criminal cases, but federal appellate courts occasionally apply plain-error review in civil cases, too.

In Davis, a criminal defendant challenged the Fifth Circuit’s “outlier practice of refusing to review certain unpreserved factual argument for plain error.” The Supreme Court noted that “almost every other Court of Appeals [besides the Fifth Circuit] conducts plain-error review of unpreserved arguments, including unpreserved factual arguments.” Further, the Supreme Court remarked that Federal Rule of Criminal Procedure 52(b), the plain-error rule, “does not immunize factual errors from plain-error review.” Finally, the Supreme Court observed that none of its cases “purport to shield any category of errors from plain-error review.” The Supreme Court thus held that a factual issue could be reviewed for plain error and remanded to the Fifth Circuit for further proceedings consistent with its opinion. Unfortunately for Davis, his success at the Supreme Court turned out to be hollow victory when, on remand, the Fifth Circuit held Nelson S. Ebaugh’s practice concentrates on business litigation and criminal defense. He is a member of the Criminal Justice Act Panel in the Southern, Northern, Eastern, and Western Districts of Texas. His office is in Houston (www.ebaughlaw.com).

endnotes

1. United States v. Saro, 24 F.3d 283, 291 (D.C. Cir. 1994). 2. United States v. Dominguez Benitez, 542 U.S. 74, 83, n. 9 (2004).