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Board details its opposition to special committee’s proposals

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Cites no ‘compelling empirical data’ to show nonlawyer ownership in law firms, fee splitting, or expanding the work of paralegals would solve access to justice issues

Michael Tanner

Mike Tanner

Proposals to test allowing nonlawyer ownership in law firms, fee splitting with nonlawyers, and broadly expanding the work paralegals could perform “would be so profoundly transformative of the practice of law in Florida that they should not be allowed, even on a test basis, without clear and compelling empirical data that they will help solve access to justice in a meaningful way with little or no risk to the public,” The Florida Bar has recommended to the Supreme Court.

In a letter to Chief Justice Charles Canady responding to the controversial report of the Supreme Court’s Special Committee to Improve the Delivery of Legal Services, Bar President Mike Tanner said unintended consequences and the lack of compelling empirical data were the two fundamental concerns that underlie all of the Board of Governors’ votes to reject the special committee’s major recommendations.

Tanner said the data currently available from other jurisdictions experimenting with changes to their law firm ownership and fee sharing rules, and expanding the use of paralegals, either fails to show that these changes will improve access or shows the negative effects of the changes.

“Indeed, the data from Arizona clearly demonstrates the peril of unintended consequences of allowing nonlawyer firm ownership; witness the efforts by large litigation finance entities to acquire ownership of law firms underway now in Arizona,” Tanner said.

The special committee was directed by the Supreme Court in late 2019 to study how legal services to consumers could be improved with lawyers playing a “proper and prominent role in the provision of these services.” It was directed to look at lawyer advertising, referral fees, fee splitting, regulation of lawyers, regulation of online legal service providers and nonlawyer providers of limited legal services, and related matters.

The committee filed its report June 28 with the court and the Bar, and the court agreed not to take it up until early this year, giving the board time to make its views known. Those views were strongly expressed at a number of special board meetings, especially on nonlawyer ownership and fee splitting.

The board held special meetings on September 8 and October 26 to discuss the special committee’s recommendations with the committee’s chair, Melbourne attorney John Stewart.

The Board of Governors began debating and voting on the special committee’s recommendations November 8. At that meeting, the board voted unanimously to reject amending Bar Rule 4-5.4 on fee sharing to allow ownership of law firms by nonlawyers (a 46-0 tally) and fee splitting with nonlawyers (a 45-0 tally). The board then voted 43-0 to reject the special committee’s recommended revision of the Bar’s advertising rules, including a proposal to end the requirement that certain lawyer advertisements be reviewed by the Bar before they are published or broadcast.

The board voted 34-10 to support the special committee’s recommendation for better education about Bar Rule 4-1.2(c), adopted in 2003, which allows the provision of unbundled legal services.

The concept of having a statewide legal lab to test new ways of providing legal services was also unanimously rejected by the Bar Board of Governors when it met again December 2.

The board at that meeting did approve some other recommendations from the special committee. It endorsed the idea of allowing legal aid organizations to organize under Bar rules as nonprofit corporations, and to have nonlawyer members on their boards of directors. These changes would conform the rules to those used for federal funding for their activities. But unlike the special committee, the board said neither idea needed to be tested in the legal lab.

The board also accepted a limited version of a special committee recommendation to allow Florida Registered Paralegals to provide more legal services under lawyer supervision. The special committee proposed that supervised Florida Registered Paralegals be allowed to provide more services in areas where litigants often appear pro se or where access may be otherwise limited. Instead, the board accepted a recommendation from board member Gordon Glover to have a pilot program at one legal aid organization to allow paralegals to provide expanded services to defendants in residential landlord/tenant and debt collection matters.

Tanner told the court each member of the board carefully reviewed the report and various background materials posted on the special committee’s website. The board also held two multi-hour special meetings in September and October where board members were able to question the special committee chair about the report and its recommendations.

Several board members also hosted town hall meetings within their respective circuits to obtain input from Bar members about the recommendations in the report and Florida lawyers submitted nearly 300 comments on the report, many signed by multiple lawyers (one comment, opposing the nonlawyer ownership and fee splitting proposals, was signed by 327 Bar members). Those comments overwhelmingly opposed most of the special committee’s proposals. (See story here.)

The Bar’s report to the court summarizes the board’s votes on the special committee’s recommendations and highlights the key comments made during their discussions:

Non-lawyer Ownership of Law Firms

• The board unanimously rejected the special committee’s recommendation to amend Bar rules, within the proposed legal lab and potentially thereafter, to permit nonlawyers to have a non-controlling equity interest in law firms.

• The Rules Regulating The Florida Bar exist primarily to protect the public and ensure that lawyers act in the best interests of their clients. Board members expressed concern that allowing nonlawyers to own interest in law firms inevitably would compromise the independence of the self-regulated legal profession by creating an inherent conflict of interest between lawyer-owners of firms, who must adhere to ethical obligations and advance principles of public service, and unregulated nonlawyer owners, whose primary goal would be to increase firm profitability.

• Other board members noted the lack of data from any jurisdiction that has allowed nonlawyer ownership demonstrating that it improves or expands the delivery of legal services. Board members noted that the medical profession’s experience over recent decades, in which practices can be structured so that persons and entities other than physicians can profit from the practice, has improved neither consumers’ access to medical care nor the overall quality of care.

• Board members reported widespread, vocal, and near unanimous opposition to the nonlawyer ownership recommendation by lawyers in their circuits.

Fee Sharing with Nonlawyers

• The board unanimously rejected the special committee’s recommendation to amend Bar rules, within the proposed lab and potentially thereafter, to eliminate the restriction on fee sharing with nonlawyers.

• Board members’ comments on this recommendation mirrored those regarding nonlawyer ownership of law firms.

Expanded Use of Florida Registered Paralegals

• The board voted to accept the special committee’s recommendation, in part, by allowing a limited pilot program to utilize Florida Registered Paralegals. This limited pilot program would be conducted within an existing legal aid organization (i.e., not within the proposed lab) and would limit the paralegals’ activities to residential landlord tenant law on behalf of the tenant, and debt collection defense. Otherwise, the board rejected the recommendation on the expanded use of paralegals.

• Board members’ concerns focused on the broad scope of the recommendation that included “Assistance with Court Proceedings” and would seemingly also permit paralegals to perform critical services in practice areas such as family law and wills, trusts, and estates where the consequences of errors can be both catastrophic and undetected for years or even decades. Board members also questioned whether this recommendation would meaningfully improve access to justice, as highly experienced paralegals often charge more than younger lawyers. Finally, board members noted the absence of statistical (or even anecdotal) evidence from jurisdictions allowing the expanded use of paralegals that this has improved the delivery of legal services.

Lawyer Advertising

• The board unanimously rejected the special committee’s recommendations to simplify and streamline Bar advertising rules and to eliminate the requirement for advance approval of lawyer advertising by the Bar.

• The board noted a statistic that more than one-half of the advertisements reviewed by Bar staff in Bar year 2020-21 did not comply with Bar rules. This statistic suggests a substantial risk that, in the absence of advance review, many lawyer advertisements would be false, misleading, or otherwise noncompliant.

• Board members also discussed that eliminating advance review would reduce the opportunity to provide constructive guidance to lawyers.

Promote Better Understanding of Rule 4-1.2(c)

• Although some board members commented that no further “education” about the rule among Bar members is needed because the comment to the rule is sufficiently detailed, a majority of board members concluded that promoting the rule would lead to its more widespread use and the associated benefit to the public by making limited legal services more available. For these reasons, the board voted to accept the special committee’s recommendation that the Bar increase education about the rule.

Not-for-Profit Legal Service Providers

• The board voted to accept the special committee’s recommendations, in part, to amend Bar rules to permit not-for-profit legal aid organizations to organize as corporations and to allow nonlawyers to serve on their boards of directors. The board rejected the recommendations’ use of the ambiguous term “not-for-profit legal service providers” and the recommendations that the proposed changes take place within the proposed lab.

• Board members agreed that the recommendations would correct an historical oversight that failed to allow legal aid organizations to be structured as corporations. The board also noted that federal law requires such organizations to include nonlawyers on their boards of directors and that full compliance with federal law is necessary for them to obtain federal funding.

Law Practice Innovation Lab Program

• The board unanimously rejected, as moot, the special committee’s recommendation to create a Law Practice Innovation Laboratory Program to test certain concepts. The board considered the lab recommendation after it had considered and voted on all of the other recommendations in the report and after it had rejected all of the recommendations the report proposed to study within the lab.

• In addition to mootness, board members expressed concerns about the lab concept in general, including an apparent waiver of applicable Bar rules in perpetuity for participants in the various lab experiments, even if the experiments ultimately were not adopted by the court. In the board’s view, this proposal, as structured, would amount to de facto rule changes for the lab participants.

“Many Board members believe these proposals compromise a lawyer’s independent judgment, which is critical to the fair administration of justice, by creating conflicts of interest between regulated lawyers and their ethical obligations and unregulated nonlawyers with ownership interests driven by profits,” Tanner said. “As this Court stated in the October 14, 2021 majority opinion in The Florida Bar v. TIKD Services, LLC, ‘[t]he inherent conflict that arises when a nonlawyer either derives income from or exercises a degree of control over the provision of legal services presents a substantial risk that the public will be exposed to and harmed by incompetent, unethical, or irresponsible representation.’”

Stewart said the special committee’s report is a recognition that the legal marketplace is changing and is an attempt to allow the profession to help design and control those changes, which it now is largely unable to do.

“This committee and this report are part of the profession and the Bar being the architect of the changes that are happening in the legal profession and the legal services marketplace, before outside forces dictate changes we may not want,” Stewart said when the report was initially released June 28.

That led to the recommendation for the legal lab, where different ways of providing services could be tested. It also means lawyers will be competing on a level playing field since any entity, whether controlled by a lawyer or nonlawyer, will be regulated to protect the public.

“There’s a significant underground legal services market that’s happening and it’s happening because it’s needed. Some of it should not be happening because bad actors are taking advantage of the public,” Stewart said. “We need to bring more of these legal services players into the fold so that they’re regulated to protect the public and lawyers are on a level playing field.”

During special committee meetings, members discussed that their efforts were not just aimed at low-income consumers, but a broad swath of low and middle-income people and small businesses that cannot afford civil legal services.

The special committee’s only firm recommendation for change was that the legal lab be created, but its proposed structure was conceptual, as were all its other proposals.

Stewart said the panel is seeking the Supreme Court’s guidance on its ideas with the request that the court refer back to the committee any ideas it likes for detailed proposals or rule amendments.

Tanner said the board is “grateful” to the court for the opportunity to respond to the special committee’s recommendations and asked to be able to provide further responses in the event the court decides to pursue any of the recommendations.