Ride the Lightning

Wow! Arizona Permits Non-lawyer Ownership of Law Firms

September 1, 2020

The landscape of law is changing – and not just because of the pandemic.

As LawSites reported on August 31, the Arizona Supreme Court issued an order on August 27 that did away with the ban on nonlawyers having economic interests in law firms and the prohibition on sharing legal fees among nonlawyers and lawyers.

Arizona is now the first state to eliminate Rule 5.4 of the Rules of Professional Conduct.

Additionally, the order permits the licensing of nonlawyers as "legal paraprofessionals" with authority to provide limited legal services to the public, including representing clients in court.

The order takes effect January 1, 2021.

In a statement, the court described its move as making "far-reaching changes that could transform the public's access to legal services."

Arizona Supreme Court Chief Justice Robert Brutinel said:

"The Court's goal is to improve access to justice and to encourage innovation in the delivery of legal services. The work of the task force adopted by the Court will make it possible for more people to access affordable legal services and for more individuals and families to get legal advice and help. These new rules will promote business innovation in providing legal services at affordable prices."

The task force the judge was referencing is the Task Force on the Delivery of Legal Services, which last October issued its report calling for fundamental changes in the regulation of legal services.

The ban that prohibits lawyers and nonlawyers from co-owning businesses that engage in the practice of law has long been controversial. The task force said that the ban "was not rooted in protecting the public but in economic protectionism."

"The legal profession cannot continue to pretend that lawyers operate in a vacuum, surrounded and aided only by other lawyers or that lawyers practice law in a hierarchy in which only lawyers should be owners," the report said. "Nonlawyers are instrumental in helping lawyers deliver legal services, and they bring valuable skills to the table."

Two weeks ago, the Utah Supreme Court also approved major changes in legal services regulation.

Utah established a two-year pilot of a regulatory sandbox — a regulatory body under the oversight of the Supreme Court, to be called the Office of Legal Services Innovation, whose charge is to license and oversee new forms of legal providers and services.

The intent is to explore creative ways to allow lawyers and non-lawyers to practice law and to reduce constraints on how lawyers market and promote their services.

While the sandbox includes entities with non-lawyer investment or ownership, it does not eliminate the ban on nonlawyer ownership outside of the sandbox.

In contrast, Arizona completely eliminated professional conduct rule 5.4, the rule that bars nonlawyers from sharing in legal fees or having an economic interest in a law firm. It also creates a new class of authorized practitioners, "alternative business structures," that need to be licensed by the court.

With regard to the new licensing scheme for legal paraprofessionals (which the task force had referred to as limited license legal technicians), the court said that they would be "the legal system's equivalent of a nurse practitioner in the medical field."

How do you become an LP? You must meet education and experience requirements, pass a professional abilities examination, and pass a character and fitness process. LPs will be affiliate members of the state bar and must conform to the same ethical rules and discipline process as lawyers.

Both of these actions remind me of something John F. Kennedy once said: "Change is the law of life. And those who look only to the past or the present are certain to miss the future." It looks like the future has arrived . . .

Sharon D. Nelson, Esq. President, Sensei Enterprises, Inc.
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