Category Archives: Regulation

Bars May Lose Antitrust Immunity

The Supreme Court is out today with a really important decision in North Carolina Board of Dental Examiners v. Federal Trade Commission. I wrote about the case back in October when it was argued – it involves the question of whether the North Carolina Board of Dental Examiners enjoys antitrust immunity for its actions excluding non-dentist competition.

Understandably, the case was followed closely by the state attorney regulators – the parallels between dentists excluding commercial tooth whitening outfits and lawyers excluding, say, commercial document preparation outfits being uncomfortably close.

The court made no bones about it, siding with the FTC: the regulatory bodies of self-regulated professions (like dentistry and the law) only get immunity from antitrust liability if they are “actively supervised” by the State.  As the court pointed out:

States, furthermore, can ensure Parker immunity is available to agencies by adopting clear policies to displace competition; and, if agencies controlled by active market participants interpret or enforce those policies, the States may provide active supervision.

Boom.

As I’ve harped on before, states have very unclear policies to displace competition in the legal marketplace. The definition of “the practice of law” is incredibly vague, and is often used to exclude non-lawyers from doing activities that remotely smell of being “legal.” This is a wake-up call that this definition needs to be clarified and refined – right now – if the state bars want to preserve antitrust immunity.

As for state bar advertising review committees – such as those employed in Florida and Nevada – I’d say this decision marks the end of them. The Court noted that “active supervision” requires, among other things, that:

The supervisor must review the substance of the anticompetitive decision, not merely the procedures followed to produce it.

Maybe the states want to interject more active supervision over the decisions these committees make, but I doubt it.  Good riddance.

 

Non-Lawyer Ownership of Law Firms

Despite the grand vision implied by the title of the ABA “Future of Legal Services” Commission, the Commission’s scope is modest. It might be summed up as trying to address this question: are there incremental ways that the practice of law could be tweaked – whether in practice or via regulation – such that access to justice might be improved?

There’s certainly work to be done on that front. Getting access to legal services is far from ideal for most folks. And, paradoxically, it’s worst for those who need it the most – those seeking help or government benefits must navigate an increasingly-complex bureaucracy.

Amidst the comments submitted to the commission are many solid ideas. Some, like allowing a measure of non-lawyer ownership of law firms, or eliminating most of the restrictions on attorney advertising, will be seen by many attorneys as massive changes. But these suggestions are really just in line with a simple idea: that the business of providing legal services to consumers could be handled a lot more like other types of services, without any meaningful reduction in quality.

This requires acknowledging some truths that most lawyers, if they are being honest and objective with themselves, would be hard pressed to deny.

Non-Lawyer Ownership

The limitation on ownership of law firms is supposed to preserve the professional independence of lawyers. This regulation presumes that lawyers answer to a higher calling than the cool logic of business.

We’d really, really love to believe that. It’s probably even true sometimes.

But the reality is that law firms are businesses. And even if it is only lawyers at the helm, these are lawyers who must take business considerations into account when making decisions. There are bills to be paid, payrolls to be made, reputations to be preserved. It’s delusional to think that lawyers running law firms are somehow magically above the tradeoffs and calculations that are inherent in running any business.

Businesses and Client Protection

OK, so lawyers face “business” pressures too. But they’re still better about protecting client rights than a faceless corporation would be, right?

Not necessarily.

Yes, attorneys have a fiduciary obligation to clients. But frankly, that’s not that important for a whole lot of routine consumer matters. We’ve got this paradigm of the adversarial system, or the lone individual fighting to speak truth to power, but let’s face it: a whole lot of legal issues involve people just trying to plow through the bureaucracy to get shit done. Get a visa, change a name, establish paternal rights, start a business – the list goes on and on.

Banking, insurance, real estate, finance – all involve similar consumer issues that are capably met by businesses. For many legal issues, people just need to get something dealt with, get the right boxes ticked, predictably, properly and on time, and know that they can move on with life.

And frankly, these types of client interests are going to be better protected by the business virtues of consistent, easy-to-use processes, than by a poorly-run law practice that’s barely scraping by.

Business Ownership and Unpopular Causes

The criminal defense lawyer lined up against the government, the consumer lawyer taking on big business, the civil rights lawyer representing a deeply unpopular cause – so much of our lawyerly identity is tied up in these sorts of “heroic” cases.

It’s a fair objection that most business-owned law firms would stay away from these sorts of cases. But again – the vast majority of legal matters don’t present this sort of stress test of a lawyer’s independence. 1

We shouldn’t let this idealized vision of independence keep businesses from being able to invest in enhancing consumer access to legal services. And remember – just because businesses can do so in this scenario, that doesn’t mean such firms are the only game in town. Just as with banking, or medicine, or a host of other occupations, specialist practices – probably owned exclusively by lawyers, as they are today – would exist to handle the truly tricky, high-stakes work.

Ultimately, improving access to justice is going to take one of three things: attorneys reinventing their businesses to better serve consumers; the definition of “the practice of law” being scaled back; or the regulators permitting businesses to participate in the legal industry.

I would love to see #1 come to pass, but it may be the case that such reinvention can’t happen at scale until businesspeople can truly partner with lawyers.

Notes:

  1. And it’s not as if traditional law firms are immune from having difficulty representing unpopular clients.

Legal Services – The Quality Myth

I’ve recently explored a thought experiment relating to what a more practical, consumer-focused license to practice law would look like.

One major objection that attorneys invariably raise – if they can keep from going apoplectic and engage the idea on its merits – is the risk to consumers in getting “legal” help from non-lawyers.

Sure, there are risks. But how serious are they?

First of all, plenty of plenty of people want to pay less for something that’s not fully-custom, with all of the risks and tradeoffs that entails. That’s an important element of consumer choice.

However, there’s a bigger issue: while lawyers are quick to play up the tradeoffs between custom and mass-market services – trotting out the scare tactics about “cookie cutter” services and lack of accountability whenever non-lawyer services are discussed – many consumers may actually prefer such services for reasons beyond just price.

Custom products may win the “spec” battle,  but mass-market solutions are not inferior across the board. There is a high degree of variability among the providers of custom legal services. Not just in competence, but in all of the things that go into the customer experience: timeliness, responsiveness, predictability, etc. One of the things large-scale businesses do well? Solve for these sorts of consumer needs in a consistent way.

Why does this matter? Back to my fashion metaphor: if you have a custom suit made, there’s a lot of potential for individual variation. It may very well make you look fabulous . . . but the process may also be a train wreck, marked by endless delays, lack of communication, rework, etc. Those factors may end up being more important than the ultimate cut of the clothing.

On the other hand, you know you can go into Nordstrom, buy something off the rack, have some in-house tailoring done, and end up with clothes that look pretty damn good. And they’ll be delivered on-time, with a smile.

For most consumers, that combination of predictability and price point makes purchasing off-the-rack the right decision – even if it means foregoing an element of fashion-wonderful upside that’s only attainable by going fully custom. It’s plenty good enough – and the predictability of the outcome makes the process lower risk than going custom. 1

In the legal world, imagine customers knowing they could call, anytime, and get an update on their status. Imagine having a clean web interface and all documents stored in the cloud. Imagine any of the myriad ways that a responsive, predictable, and transparently priced experience could be delivered to customers. THAT’s what a larger-scale business could deliver – and it’s what a whole lot of consumers are clamoring for. 2

This obviously doesn’t work for every legal issue or practice area. Getting custom help is critical when your freedom is on the line, or the matter is complex, high-stakes, and adversarial. But for many types of legal services, there may actually be more risk in the custom solution than the off-the-rack choice.

If only such options were available.

 

Notes:

  1. It may even make it lower legal risk than custom in some areas, as businesses can build in process and quality assurance in a systematic way that few law practices invest in, particularly for lower-value consumer work.
  2. This isn’t to say that lawyers couldn’t deliver services this way. It’s just that they haven’t done so, and don’t seem to have much interest in starting.

What Would A Meaningful Law License Look Like?

A couple of weeks ago, I asked the question of whether occupational licensing for lawyers really benefits consumers. While I’m convinced that the license requirement makes it likelier that people will get competent legal help, it also adds a powerful level of cost, by foreclosing other options that consumers might legitimately want to choose.

In Avvo’s comments to the ABA Future of Law Commission, I observed that if we were to analogize the legal industry to the fashion industry, we have given consumers a choice between only two, starkly different options: haute couture or making their own clothes.

Just as we’d all look a little better if we could walk around in custom-tailored clothes, we would all be better-served – at least insofar as the contours of our legal solutions would tightly hug the curves of our specific situations – if given the luxury of custom legal work.

But just as with custom tailoring, most people can’t afford that level of fit and quality. And most people are OK with the tradeoffs between full legal representation and something a little more, shall we say, off-the-rack – at least for a whole range of straightforward and relatively low-risk matters.

Take, for example, “Legal Docs By Me,” which offered, for a flat fee, professional help completing basic forms like change of name applications. For that, the company’s owner, Derek Distenfield, was prosecuted for practicing law without a license.

Was the complaint against Legal Docs By Me filed by a customer unhappy with the service provided? Of course not – it was filed by the local bar association.

As Tom Gordon points out in this recent WSJ editorial, the definition of “the practice of law” is quite vague. It’s been left up to the courts to define, and has largely been used, by lawyers, to try to define within the exclusively cartel of the lawyers any work remotely related to legal matters.

Like help filling out forms, or basic guidance.

Look, I respect lawyers. In fact, I respect them enough to say that we should rise above this pettiness – our education, judgment and experience is worth more than simply helping consumers fill out forms. Let’s preserve a shred of dignity and cede some ground that it’s petty and pointless to fight over.

Yes, I know that threatens some lawyers’ livelihoods. But I’m also confident those folks can move on to something that makes better use of their talents.

So what would a meaningful license for the practice of law look like? It would start with a better, more limited definition of what, exactly, the “practice of law” really is.

Courtroom Advocacy

Representing clients in court – that’s what a lot of people think of when they think of “the practice of law,” and it strikes me as the sort of thing that should go to the heart of what it means to practice law. It’s the combination of zealous advocacy and preservation of the clients’ interest above all else. It doesn’t take much to make the case that this should constitute “the practice of law.”

Advice and Counsel

This is where it gets a bit trickier. Advice and counsel may be the biggest single area of legal work present today. It includes a wide swath of activities: advising clients in putting contracts together, working to comply with government regulations, to form business entities and combinations, to shape company direction, and to prepare for litigation.  Much of this work is what we would think of as “the practice of law.” It involves both the application of specialized legal training and the presence of a client relationship of trust and reliance.

But then there’s all of the day to day-to-day stuff.

Should it really be considered “the practice of law” for someone to help another person out with the bureaucratic paperwork required to facilitate a no-fault divorce or guardianship paperwork? Or to do a name change, or to apply for disability benefits?

Our increasingly bureaucratic world requires more and more paperwork. And ironically, the impact of all this red tape falls most heavily on those least able to pay for professional help in dealing with it. Those with steady incomes, stable marriages, and reasonably trouble-free children have little, if any, exposure to this world – while those going through a flood of troubles end up encountering it at every turn.

But should they want help – of any kind – in dealing with it, their choices are limited to dealing with it themselves or choosing the black box of professional legal services. It’s back to do-it-yourself or haute couture.

Limit the License

Given the expansiveness of field-claiming by the legal profession, I propose a rather radical adjustment: limit the definition of “the practice of law” – and, correspondingly, the activities for which a lawyer is required – to those situations where third party representation is involved. That’s mostly going to be courtroom and administrative agency advocacy.

Anything else that smells “legal?” Anyone can do it.

Stifle the gasps; this wouldn’t be the end of the world for lawyers. Sophisticated users of legal services would go right on insisting that their transactional and counseling services be rendered by people with specialized legal training and credentials. The bars could go right on limiting their membership exactly the way they do today. Their members could use that as a marketing/quality advantage.

Of course, business would quickly dry up for attorneys operating in areas where there is little need for legal training. People who are paying for a lawyer only because no alternatives are available would swiftly migrate to lower cost services.  But for those offering services really involving the application of legal skill and training? Most people who currently pay licensed attorneys to do this work would continue to do so (although attorneys would probably have to work a little harder to market WHY it’s important to choose a licensed attorney).

Geographic Silliness

Limiting what’s included within the definition of “the practice of law” (for which a license would be required) would also largely solve for the rigid geographic licensing rules. Today, lawyers bend their minds around whether they can telecommute from a neighboring state, or live in one state where they aren’t licensed while operating a law practice in the state where they are.

It’s the height on inanity that anyone burns any brain cells whatsoever thinking about this, but the bar rules are what they are, and there have been plenty of cases of bar regulators mechanically interpreting the rules in ways that would prevent such practices.

Taking such a stance requires going WAY down the hyper-regulatory rat hole. First, you’ve got to assume that licensing in one state somehow evidences a level of competence and familiarity with that state’s law and procedure that a lawyer licensed in another state would not possess. That’s a huge assumption, given how expansive and specialized the law has become. A Washington-licensed divorce lawyer would be far more competent to handle a California divorce than I would be, but guess which one of us is authorized by the regulatory authorities to handle that matter?

Second, you’ve got to blind yourself to the question of consumer harm. Telecommuting lawyers? Lawyers living in one state and working in another? There is zero impact on consumers; it’s the logic of grocery clerks and bureaucrats that has anyone worried about such matters.

If, however, we limit the definition of “the practice of law” to representation for courtroom advocacy, there’s no need to worry about these demarcations – and we’re back to dealing with a distinction that actually means something. In the courtroom, local knowledge – particularly of state procedural rules – matters a lot. And a lawyer wouldn’t be able to appear in a state’s courtrooms without being licensed there (or, perhaps, getting authorization to appear pro hoc vice). It’s a simple, bright-line test. For anything else – whether counseling or telecommuting – it wouldn’t matter where the lawyer might be licensed, as those activities are not “the practice of law.”

What do you think? Why not just take licensing back to the core of what it means to be a lawyer?

 

WSBA Ethics Opinion on . . . Avvo

I missed this when writing about the Washington State Bar’s new ethics opinion regarding online lead generation, but the bar has also issued an opinion on attorneys participating in an unnamed service that sounds an awful lot like Avvo:

1. May Lawyer claim the profile and provide personal and professional information, knowing that the website will generate a publicly viewable numeric and descriptive rating
that is, at least in part, influenced by the amount of information that Lawyer provides?

2. May Lawyer claim the profile and participate in the website if other users attach to Lawyer’s profile publicly viewable (1) client ratings or (2) peer endorsements about Lawyer’s services?

3. May Lawyer endorse another lawyer in exchange for a reciprocal endorsement?

The WSBA’s conclusions are, unsurprisingly, Yes, Yes, & No.

Despite once again failing to acknowledge the first amendment boundaries on the bar’s ability to regulate in this area, the WSBA concludes that lawyers can indeed use this mysterious service, provided the communications involved are not materially misleading. A few nuggets from, and thoughts on, the opinion:

  • Lawyers are to take “reasonable steps” to ascertain how the service will make representations about the lawyer, and should not participate (other than to ensure information is accurate) if the service does not disclose how ratings are calculated.
  • In case you’re wondering, you can read about how the Avvo Rating is calculated here and here.
  • Attorneys who claim a profile have an obligation to ensure the information in the profile remains accurate and up-to-date. That’s straightforward enough, and – regardless of what you might think of this as a regulatory mandate – is a critical practice for online reputation management.
  • Client reviews and endorsements must be “accurate.” I don’t think that word means what the bar thinks it means – reviews and endorsements are typically statements of opinion, and as such are not amenable to determinations of “accuracy.” In any event, to the extent an endorsement refers to factual inaccuracies, an attorney can delete it from their Avvo profile. However, for reasons that should be obvious, Avvo does not allow attorneys to delete client reviews.
  • I rather suspect that the Bar’s reading of an obligation upon attorneys to monitor-and-attempt-to-remove “inaccurate” client reviews and endorsements is preempted by 47 U.S.C. 230(c)(1).
  • The Bar says that lawyers can’t “logroll” endorsements – provide an endorsement simply because the other lawyer agrees to post a reciprocal endorsement. I don’t agree with the opinion’s conclusion that reciprocal endorsements violate the rule against “providing something of value for recommending a lawyer’s services.” That rule has been swallowed by its exceptions – including, notably, the right to pay for advertising – and is long overdue to be eliminated.  However, we at Avvo have always advocated against logrolling endorsements. Posting – or accepting – endorsements in the absence of familiarity with the other lawyer’s work looks deceptive, shoddy, and cheap. Endorsements are best, for the lawyer and potential clients, if they provide a specific, detailed view of what makes that lawyer stand out.

WSBA Ethics Opinion re Online Lead Generation

The Washington State Bar (of which I am a member) has issued an ethics opinion finding that attorneys can, generally speaking, participate in online lead generation services.

While it’s good to see the WSBA take this step, it isn’t breaking new ground. The centerpiece of the opinion reflects the comments (paragraph 5) the ABA added to Model Rule 7.2 last year.

Unsurprisingly, I also have a few beefs with the opinion.

Too Many Rules

First of all, I wish we could simply dispense with all of this nonsense. Attorneys can advertise – in any of a million ways, as long as such advertising isn’t false or deceptive. We’re burning far too many brain cells, and depriving consumers of far too much information, worrying about all of these irrelevant details. We should simply eliminate most attorney advertising regulation as the counter-productive surplussage it is.

What First  Amendment?

It would have been nice if the Bar had given a nod to the First Amendment, and the substantial constraints it places on regulation of commercial speech.  Too few bars do this in their ethics opinions, and fewer still actually interpret their rules (at least when giving ethics guidance) as if they are subject to the First Amendment. In this case, the Bar stuck exclusively to citing chapter and verse from its own Rules of Professional Conduct.

Forms of Payment for Advertising

While acknowledging that attorneys can participate in online lead generation, the opinion does not come flat out and say that attorneys can pay for such advertising on a per-lead or per-client basis. They imply as much, via a footnote, but the opinion would be clearer and more useful if they just came out and said it.

Words Attorneys Can’t Say

The foolishness around “specialists” and “experts” continues. Again, this IS what the Bar’s rules seem to call for. But the Bar would be wise to clarify that restrictions on the use of such language by attorneys are only constitutional to the extent such terms are accompanied by a statement or implication that a third party has certified such specialization or expertise.  For example: as long as I’m not saying or implying that someone has conferred the honorific upon me, I’m confident the Bar can’t prohibit me from stating that I have expertise in attorney advertising regulation and communications law.

And Yet More Over-Regulation

The Bar properly notes the issue with “lawyer referral services,” insofar as they suggest they are “matching” a client to the best possible lawyer but instead sending them to the attorney who has paid for promotion.  That’s no good; it deceives consumers and would violate even a sensible and limited set of ad rules.

However, the Bar goes too far in stating that it is likely “that prospective clients will infer that the lead generation service is making subjective matching decisions.”

Says who? Does the Bar have any empirical evidence showing that consumers make these kinds of assumptions?

There is a long list of federal court decisions over the last ten years dismantling attorney advertising regulation precisely for making these sort of evidence-free conclusions. Attorney regulators carry the burden of showing that their attempts to limit speech are both necessary and no more extensive than required.

Instead of making such a case, the Bar plows ahead to solve this “problem” by requiring that lead generation services “clearly disclose, in plain and conspicuous language, that the match was made solely based on specified objective information (e.g., geographic information, years of practice, or practice areas as described by the lawyer).” Such a “solution” is not only unsupported by any evidence that it is necessary, but is also overbroad in not acknowledging that there are many ways a company could market to consumers without implying that it was “matching” them to the right attorney based on subjective factors.

It comes full circle to my first point: by continuing to rely on such picayune, detailed advertising rules, the Bar makes it harder than it should be consumers to get information about, and access to, legal services.

 

End Occupational Licensing . . . For Lawyers Too?

This New York Times article starts out with some well-deserved gushing over how Uber has disrupted the incumbent taxicab industry, but goes on to note the increasing skepticism over occupational licensing in general. The Obama administration has proposed sending some $15M in federal funding to the states to study the costs and benefits of occupational licensing.

As the article notes, there are a lot of weird anomalies in occupational licensing requirements, and a paucity of data showing that such requirements actually produce better consumer outcomes.

One thing we do know, however: occupational licensing is great for establishing a cartel that keeps prices high, and which fights viciously to keep competitors out.

Which naturally made me think of the Bars.

Uber is upsetting the cab cartels, and it’s pretty certain that some of the excesses of licensing expansion (license requirements for hair braiding, anyone?) are going to be pulled back. But what if we did something really outlandish and eliminated the occupational licensing requirement for lawyers? What would happen?

One belief held by many lawyers is that occupational licensing protects clients by ensuring a competency. If that argument sounds familiar, it should – it’s used by approximately 100% of all occupational licensing proponents.

Perhaps the Obama administration funding will get through and we’ll start seeing more hard data on this. But let’s pause for a moment and ask ourselves whether the claim of heightened competence is really true for the Bar.

To be sure, the necessities of going to law school (typically) and passing the bar act as gates to the completely vacant offering up legal services. But I’ve got news for you: it’s not that high of a gate. And it only tests one, narrow type of competence. There are a lot of really bad lawyers out there. Maybe not really bad in the knowin’ the law kind of way (although I’ve run across plenty of those), but really bad in the have-their-shit-together-and-can-communicate-with-real-people kind of way. Or can-run-their-business-effectively kind of way.

The state-based limitations on practice offer no particular help; I’m licensed in California, but I couldn’t tell you the first thing about most California law. The law has gotten so broad, so complex, that it’s illusory to think that someone licensed in a given state necessarily has any greater competence there.  But despite not having lived in the state for the last 14 years, and not having appeared in a California courtroom in nearly two decades, I could move there tomorrow and start representing clients.

Would it be so bad (for consumers) if law could be practiced without a license? Consumers could still choose to use someone who went to law school, or who met the membership requirements of a bar association. It just wouldn’t be their ONLY choice if they have anything remotely related to a legal question.

Or what if we adopted a system like the UK, where a license is only necessary to engage in certain “reserved activities,” such as representing clients in court, handling probate, and transferring real property?

I do think there are a lot of things that people need a “real” lawyer for. But I’m not convinced that our current system of state-based occupational licensing is really protecting consumers so much as it is protecting our cartels.

 

Time to Gut the Ad Rules

Avvo recently submitted its comments to the ABA’s “Future of Legal Services” Commission, and I wanted to highlight one of the specific suggestions we made:

Get rid of most attorney advertising regulation.

Or more specifically, eliminate everything other than restrictions on false advertising and real-time solicitation. Our suggested advertising rules would look like this:

Rule 7.1: A lawyer shall not make a false or misleading communication about the lawyer or the lawyer’s services.

Rule 7.2:  A lawyer shall not by in‑person, live telephone or real-time electronic contact solicit professional employment when a significant motive for the lawyer’s doing so is the lawyer’s pecuniary gain, unless the person contacted:

(1)  is a lawyer; or

(2)  has a family, close personal, or prior professional relationship with the lawyer.

Everything else in the attorney advertising rules – prohibitions on specific forms of advertising, hard-and-fast disclaimer requirements, vague provisions about “lawyer referral services” and the like – is the crusty accretion of over-regulation. Many of these provisions pre-date Bates v. Arizona, and would be contrary to lawyers’ First Amendment right to advertise were it not for some begrudging exceptions language that’s been bolted on.

Other provisions found in the RPCs of many states, such as pre-review of advertising (by a committee that may include a law firm’s competitors) and limitations on many forms of legitimate advertising, are fundamentally anti-competitive and often highly arbitrary in application.

As anyone who pays close attention to this area knows, there is absolutely nothing in this dog’s breakfast of regulations that actually buys us any greater consumer protection. 1 Anything egregious and harmful in attorney communication can be enforced via the general prohibition on false and misleading advertising.

What’s more, this thicket of regulation is actively harmful. I’ve spoken with hundreds, if not thousands, of attorneys over the last seven years about this topic. There is a general level of concern and uncertainty over what attorneys are “permitted” to say to potential clients. And lawyers, being the risk adverse creatures they are, tend to clam up.

The Supreme Court has repeatedly noted in some two dozen advertising cases over the last 40 years that consumers have a very strong interest in minimally restrained commercial speech. As the court observed in Bates:

[T]he consumer’s concern for the free flow of commercial speech often may be far keener than his concern for urgent political dialogue.

And yet, the Bar restrictions, with their often-byzantine level of detail and apparent reach into all manner of attorney speech, are preventing attorneys from providing consumers with the robustness of information necessary to make good purchasing decisions – or to get legal help at all. This is bad for consumers, and ultimately, bad for the Bar.

While there are other things that the profession can do to improve access to justice, one immediate and easy opportunity for improvement is to massively prune back attorney advertising regulation.

 

Notes:

  1. And consumers rarely complain about lawyer advertising violations; virtually all such complaints are filed by other lawyers.