Public Protection 2.0

By Teresa J. Schmid

Teresa J. Schmid is a partner in the firm of Schmid & Watson LLP in Los Angeles. She is a consulting expert in legal ethics, lawyer regulation, and association management. She is a member and past chair of LACBA's Professional Responsibility and Ethics Committee and a member of the State Bar of California's Committee on Professional Responsibility and Conduct. The views expressed are her own.

"Protection of the public shall be the highest priority for the State Bar of California and the board of trustees in exercising their licensing, regulatory, and disciplinary functions. Whenever the protection of the public is inconsistent with other interests sought to be promoted, the protection of the public shall be paramount." Business and Professions Code section 6001.1.

At first glance, it was a plan like any other plan, unlikely to stir the hearts of anyone but its framers, until January 2018. At its annual planning meeting, the State Bar of California's board of trustees added to its 2017-2022 Strategic Plan[1] Goal 4, Objective d, which required a study to review online legal service models and determine if any regulatory changes are needed to better support access to justice through the use of technology. The purpose of the study was to balance the dual goals of public protection and increased access to justice. It implied that if public protection and access to justice require balancing, they may be competing goals. Under Business and Protection Code section 6001.1, if rules and statutes regulating the legal profession protect the public but inhibit access to justice, public protection comes first, and access to justice trails—or fails.

Recently the Second Commission for the Revision of the Rules of Professional Conduct (2014-2017), engineered a total revision of the California Rules of Professional Conduct[2], which went into effect November 1, 2018.[3] For the first time in their history, the California Rules of Professional Conduct structurally track the American Bar Association's Model Rules of Professional Conduct. The commission not only renumbered the rules to mirror the model rules' structure, but it also examined each rule substantively to align it with its model rule counterpart where possible, subject to California law. The revised CRPC became a prelude to the public protection/access challenge of Goal 4, objective d. That goal is now at hand.

In July 2018, the State Bar's board of trustees commissioned Professor William Henderson of the Indiana Maurer School of Law to conduct a landscape analysis of the current state of the legal services market, including new technologies and business models, with a focus on enhancing access to justice. Professor Henderson presented his Legal Market Landscape Report[4] to the board at its July 2018 meeting.  Even for lawyers experiencing the realities of the practice environment the report describes, the report's findings are chilling. Observing that the practice of law has evolved into two distinct segments, one serving organizations (Organizational Clients) and the other serving individuals (PeopleLaw), both are under severe economic stress; the PeopleLaw segment alone shrank by nearly $7 billion (10.1percent) between 2007 and 2012. The core economic problem of legal practice is its lagging productivity; a growing proportion of U.S. consumers are choosing to forego legal services rather than to pay its increasing prices. The typical small firm lawyer bills only 2.3 hours of legal work per day. Of that amount, only 82 percent is actually billed to clients, and of the amount billed, only 86 percent is being collected, the equivalent of 1.6 hours. At the average small firm hourly rate of $260, average gross receipts per year are only $105,000 to cover both overhead and lawyers' compensation. Because of regulatory constraints such as rules 5.4 (prohibiting sharing fees with non-lawyers) and 5.5 (regulating the unauthorized practice of law and multijurisdictional practice,) lawyers must allocate much of their time to "relatively ineffective methods of finding work."[5] For example, despite the holding in Bates et al v. State Bar of Arizona (1977)[6] that nondeceptive lawyer advertising should flow both "freely and cleanly," rules limiting advertising and noninvasive solicitation persist, limiting lawyers' ability to compete in the legal services marketplace with other professionals not subject to those constraints.[7]

But the real social cost of an inefficient legal services market is reduced access to justice for the public. The National Center for State Courts recorded the effects of this inefficiency in its own report: in a sample of 925,344 civil cases studied in 2012-2013, 76 percent involved at least one self-represented party, roughly double the number found in a comparable study conducted 20 years earlier.[8] The legal services market is broken, plagued with polarized trends of plummeting provider productivity and of skyrocketing unmet needs.

On July 20, 2018, the State Bar trustees created the Task Force on Access Through Innovation of Legal Services.[9] Its charge is to enhance the delivery of, and access to, legal services through the use of technology, including artificial intelligence and online legal service delivery models. It must evaluate regulatory barriers to innovation, including: UPL (rule 5.5); advertising and solicitation (rules 7.2 and 7.3); partnerships with non-lawyers (rule 5.4); and fee-splitting with other lawyers, concluding compensation for client referrals (rule 1.5.1). It is also instructed to consider entity regulation to support the development of, and provide accountability for, new business structures such as multidisciplinary practice models (MDP or collaborative practices including lawyers and other professionals) and alternative business structures (ABS, or models that provide both legal and non-legal services.[10] The task force held its first meeting on December 5, 2018, and will complete its report and recommendations by December 31, 2019.

Most of the task force's work is ahead of it. The insights borne of hard work, deep research, and long discussion are yet to come. The board's original concept for the task force was to study reforms that "balance the State Bar's dual goals of pubic protection and increased access to justice." [11] The task force apparently noted that Business and Professions Code section 6001.1 established the primacy of public protection, and it wisely framed its mission as one of identifying possible regulatory changes rather than a balancing of interests.

The solution will not be found in balancing but in reform. Protection of the public requires access to justice. The legal profession cannot protect the public unless it can reach them; any regulation that prohibits fair, transparent, and nondeceptive interface between legal providers and consumers deserves scrutiny, even elimination. The solution will have the following features:

1) It will codify a definition of "public protection" that includes access to justice as an essential element.

2) It will codify a definition of the "practice of law" that replaces the varied and subjective standards derived from cases such as Birbower v. Superior Court of Santa Clara County.[12]

3) It will treat both lawyers and prospective clients as commercial actors in a legal marketplace that is efficient and mutually beneficial.

4) It will assume that most prospective clients are experienced consumers who exercise caution in seeking the services of any licensed professional by checking references and deliberating before deciding to hire.[13]

One might call such a system: Public Protection 2.0.

[1]State Bar of California, Goals and Objectives 2017-2022 Five-Year Strategic Plan, available at https://www.calbar.ca.gov/Portals/0/documents/bog/2017-2022_FiveYearStrategicPlan.pdf.

[2] R. of Prof'l Conduct, Nov. 1, 2018, available at http://www.calbar.ca.gov/Attorneys/Conduct-Discipline/Rules/Rules-of-Professional-Conduct/Current-Rules.

[3] Id.

[4] William D. Henderson, Legal Market Landscape Report, Attachment A, available at: http://board.calbar.ca.gov/Agenda.aspx?id=14807&tid=0&show=100018904&s=true#10026438.

[5] Id. at 14-15.

[6] Bates et al v. State Bar of Ariz. (1977), 433 U.S. 230, 384.

[7] See 2015 and 2016 Report of the Association of Professional Responsibility Lawyers' Regulation of Lawyer Advertising Committee, available at https://aprl.net/public-statements/.

[8] See discussion of NCSC report in Legal Market Landscape Report, available at http://board.calbar.ca.gov/docs/agendaItem/Public/agendaitem1000022382.pdf.,

at 19-20.

[9] Task Force on Access Through Innovation of Legal Services, available at: http://www.calbar.ca.gov/About-Us/Who-We-Are/Committees-Commissions/Task-Force-on-Access-Through-Innovation-of-Legal-Services.

[10] California's ethical rules regulate individual lawyers, but not law firms or other potential practice-related organizations. See Chambliss, Elizabeth, MDPs: Toward an Institutional Strategy for Entity Regulation, Legal Ethics, Vol. 4, No 1, 45-65 (2001).

[11] William D. Henderson, Legal Market Landscape Report, Attachment A, available at: http://board.calbar.ca.gov/Agenda.aspx?id=14807&tid=0&show=100018904&s=true#10026438.

[12] Birbower v. Sup. Ct. of Santa Clara Cty (1998), 17 Cal.4th 119.

[13] See Edenfield et al. v. Fane (1993), 507 U.S. 76, permitting telephone solicitation of prospective clients.