Focus On

Lawyers see ‘considerable’ risk, scant prospect of reward in ABS

Thursday, February 05, 2015 @ 7:00 PM | By Cristin Schmitz

The growing debate over non-lawyers owning law firms should be resolved as part of a larger conversation regarding modernization of lawyer regulation, says the County and District Law Presidents’ Association.

The group, which represents 46 local law associations and 12,000 mostly sole practitioners and small firms across Ontario, is urging the Law Society of Upper Canada to broaden consultations with the bar about whether to scrap the blanket ban of alternative business structures (ABS), such as publicly traded legal services corporations and other forms of non-lawyer owned and controlled law firms.

“After our review and consultation with our membership across Ontario we remain to be convinced that any of the alternative business structures proposed would have a benefit for the legal consumer or the profession; in fact, we believe these models present considerable risk to the profession that has not been fully studied or appreciated,” said Michael Ras, CDLPA director of public affairs.

“We hope that the [LSUC’s professional regulation] committee will take our advice to open up a broader discussion on regulatory modernization, and give the profession more guidance on the use of technology,” such as cloud computing, to help lawyers innovate and modernize their legal practices without transforming law firm ownership. Members of the LSUC’s ABS working group, which issued a report on the issue including a range of potential proposals last year, have heard similar sentiments at meetings with legal groups across the province.

The Ontario Trial Lawyers Association, representing 1,500 personal injury lawyers, and CDLPA are speaking out against regulatory reforms that would enable non-lawyers to own majority stakes in law firms, an ABS option the LSUC is investigating.

Opposition within the profession appears to be building, even among ABS working group benchers.

“In my opinion, [lawyer] independence is the number one issue — not the economics, not the business aspect, not anything to do with consumerism,” said bencher and ABS working group member James Scarfone at a County of Carleton Law Association ABS town hall meeting Jan. 21 in Ottawa.

“The issue here is independence of the bar and, in my opinion, the ability to sell part of your practice to an investor will absolutely compromise that,” the personal injury practitioner with Scarfone, Hawkins in Hamilton, Ont., told 40 law association members. “I believe the lack of independence will weaken the bar in general…and, with great respect, I think it will weaken the law society.”

However, bencher Malcolm Mercer, a litigator with Toronto’s McCarthy Tétrault, pointed out that the U.K.’s Consumer Panel has concluded that predictions of a collapse of lawyer ethics did not occur after ABS were permitted there in 2009.

“What’s important is to be thoughtful in the way that you would regulate it,” said Mercer, who co-chairs the LSUC’s ABS working group. “We’ve learned a lot from Australia about making sure that lawyers are in charge of the legal services practices, making sure that lawyers are responsible if there is ethical misconduct. There’s no reason that’s not a transferable proposition.”

Bencher Adriana Doyle, an Ottawa family law practitioner, told the group she is “not there yet” in terms of being persuaded of the merits of ABS.

“I think it’s early to tell in England what’s happening there. Before we get to trying to come up with different models I think there has to be some steps,” including more dialogue within the profession and enabling law society regulation beyond individual lawyers to include law firms, she said.

“For us to leapfrog now, and talk about possibly going to a model which involves lawyers with non-lawyers, may be [too] much of a leap in my view but…we cannot remain stagnant.”

Mercer said the U.K. Consumer Panel’s most recent annual survey in December indicates that 63 per cent of consumers felt they received value for their money in legal services (up from 51 per cent).

“Four years ago, perhaps five years ago, fixed fees in family law in England were at 15 per cent [of files] —they’re now at 45 per cent,” he said. “We see many things in England…that innovations are in fact happening in a significant way when liberalization occurs.

“What I think we need to do is find ways that liberalize in the public interest, that allow other ways of providing services to evolve without destroying the good things about what we have, and without causing unnecessary collateral damage.”

Charles Gluckstein of Toronto’s Gluckstein and Associates, chair of OTLA’s ABS committee, told the CCLA that the personal injury bar “is interested in the modernization of law” and improving the legal profession.

“I think that’s a broader context than just ABS,” he said. “ABS is one of the solutions that could come out of the discussion of the modernization of law, and I think that’s more the debate that OTLA is promoting.”

Gluckstein argued that the commoditization of law, combined with consolidation in the legal industry and reduced choice for clients as large ABS gobble up smaller law firms, shifts the focus from clients to profits.

“Really their focus is on return on equity, and if you go into some of their statements [of] these publicly traded law firms it’s all about…what their returns are, and how they’re going to do growth in the future, because that’s who they’re responsible to — their shareholders.”

Gluckstein said OTLA is pleased that the law society has scrapped a vote on ABS initially planned for next month, and instead pledged further consultations on any reform proposals before a vote is taken.

LSUC treasurer Janet Minor told The Lawyers Weekly that benchers “have in no way made any decisions about what we are going to do, or not do, and it’s very important that the profession give us as much feedback and comment as they can.”

She said the ABS working group will soon make an interim report to convocation which summarizes roughly three dozen written responses received to the discussion paper.

“This is the first stage and we’re going into a second stage, so this matter will not be before convocation for decision, I would expect, until 2016,” Minor said.