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Hundreds of Bar members oppose special committee proposals

Senior Editor Top Stories

Question conceptual suggestions for nonlawyer ownership and fee splitting, expanded paralegal duties

Rule booksAs a young lawyer trying to get new business and clients, Kay Lewis found accountants a good source of referrals. But some of them came with pressure to share her fees with the referring accountant — something she refused.

Lewis is concerned that such pressure would be inevitable with the Special Committee to Improve the Delivery of Legal Services’ conceptual idea to test allowing sharing of fees with nonlawyers.

“If The Florida Bar were to permit such practices, then young attorneys will become prey to seasoned nonlawyers’ pressure. It was a very uncomfortable position to be in, and the only power is to say that it is NOT allowed under the Bar rules,” Lewis wrote to the Bar. “The sharing of fees is a dangerous issue allowing nonlawyers to de facto practice law informally by giving ‘legal’ opinions to clients and then putting the liability on the attorney for anything that goes wrong.”

Ray Blacklidge likes the committee suggestions to create a legal lab to test the innovative ways of providing legal services and for testing the idea of allowing paralegals to perform more services under lawyer supervision. He called that a good proposal “as long as the work is billed at a paralegal rate.”

But he didn’t like the committee’s idea to test allowing active nonlawyer employees of a law firm to have a minority ownership interest in the firm or allowing splitting fees with nonlawyers, saying those would raise a host of ethical and UPL questions.

“This is a very bad idea and starts us down a very slippery slope. Our legal profession has steadily moved away from being a profession and towards just being a business,” Blacklidge wrote.

Blacklidge and Lewis had plenty of company. The Bar accepted comments through October 29 on the special committee’s report. Hundreds of lawyers responded — Brent Steinberg submitted an opposing comment signed by 326 other Bar members — with the vast majority opposing the committee’s main proposals. Opponents included four Bar sections, local bar associations, and 20 former Bar presidents.

The Board of Governors has had two special meetings to allow Board members to ask former Bar President John Stewart, who chaired the special committee, questions about the report. On November 8, the Board is scheduled to discuss the issues and make its own recommendations to the Supreme Court of Florida.

The special committee was created by the Supreme Court and directed 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, which agreed to wait for the Board of Governors input before considering the recommendations.

The committee made only two specific recommendations. One was to better publicize Bar Rule 4-1.2(c), which allows for provision of unbundled legal services. That wasn’t mentioned in most comments but those who did tended to support that suggestion.

The second proposal was to further explore the idea of creating a “legal lab” under Supreme Court control where innovative ways of providing legal services could be tested and data collected on their effectiveness. Bar rules could be waived for participants in the lab, as long as no consumer harm was shown by the monitoring. The committee recommended if the court is amenable to the idea that the committee be given an additional six months to flesh out how the lab, which is based on similar programs already running in Utah and Arizona, would operate.

Other conceptual proposals by the special committee were presented as projects that could be tested in the lab. Those include:

• Allowing law firms to give nonlawyer active firm employees a minority interest in firm ownership. Outside ownership investors would not be allowed, and lawyer owners would have to ensure that nonlawyer owners complied with all Bar rules. Committee members said that could help law firms attract employees who could add value to the firm and improve delivery of services.

• Allowing lawyers to split fees with nonlawyers, such as online companies offering legal forms and simple legal services.

• Allowing Florida Registered Paralegals to provide an expanded range of services “in specific areas and in a law office” under a lawyer’s supervision.

• Allowing nonprofit law firms, which would amend rules to allow the existing practice of many legal aid offices, many of which have nonlawyers on their boards of directors. That also drew some support when it was mentioned by commenters.

• Streamlining the Bar’s advertising rules by removing some of the details to rule comments and considering eliminating the requirement that lawyers submit ads for Bar review before they are published or aired for the first time. Instead, Bar members would be allowed to voluntarily submit ads and would be protected from a grievance action if the Bar approved the ad. Most commenters did not mention the advertising rule recommendation; those who did generally supported streamlining the rules.

The committee also recommended not changing Chapter 8 of the Rules Regulating The Florida Bar, which governs nonprofit lawyer referral services or Bar Rules 4-7.17 on payment for advertising or promotion and 4-7.22 on for-profit referral services, directories, and pooled advertising. The committee said those might have to be changed if the Rule 4-5.4 on fee splitting is amended. Only a few commenters mentioned that recommendation, but they tended to support it.

Most commenters tended to lump nonlawyer minority firm ownership and fee splitting together and opposed both, saying it would promote conflicts, undermine ethics, and make the practice of law a business instead of a profession. They also warned that minority nonlawyer ownership by firm employees would be a slippery slope that would lead to corporate ownership of law firms.

“Nonlawyer ownership of law firms may be coming to America, but I don’t think Florida needs to be on the forefront of this experiment,” wrote Allan Charles.

Alicia Whiting-Bozich warned that many disbarred attorneys find work as paralegals. Under the special committee’s proposal, they could become part owners of law firms with a say in operations.

“This proposal to allow NLO [nonlawyer ownership] is sheer homicide for the members of Florida’s legal profession,” wrote J. Steele Olmstead. “The practice of law is the sole profession that aids Florida’s judiciary in dispensing justice, resolving disputes, maintaining our community institutions, protecting our constitutional, property, and environmental rights, and correcting the wrongs done under color of law. What happens when some of those lawyers are controlled by Wall Street vulture capitalists? Well, lawyers take an oath. The NLO owner does not….”

Members expressed the same concerns about sharing fees with nonlawyers, saying it would give effective control of lawyers and the attorney-client relationship to nonlawyer companies.

Tim Chinaris, a former Bar ethics counsel and a member of the Professional Ethics Committee, said the Arizona and Utah legal labs have not produced much evidence of improving legal access, with the first three programs in Arizona being aimed at higher income clients needing wealth management, estate, or similar high-end services.

“The most recent [lab] applicant in Arizona is multi-billion dollar, publicly-traded LegalZoom [an online provider]. LegalZoom plans to hire lawyers who, as its employees, will provide legal services to LegalZoom customers,” Chinaris wrote in an extensive letter to the board. “Another large technology-based entity, Rocket Lawyer, was approved to operate in Utah. Like LegalZoom, Rocket Lawyer employs a staff of lawyers to provide legal services to the company’s customers.”

Bar ethics rules permit lawyers already to provide any services, including forms, that would be offered by LegalZoom or Rocket Lawyer, Chinaris said. And he warned that nonlawyer-driven entities will not put the resources into identifying potential conflicts of interest with new clients that law firms do.

“The practice of law is a sacred trust. It is the bedrock of our democracy. Nonlawyer ownership of law firms and the splitting of legal fees with nonlawyers unduly places profit over ethics and divides loyalty to clients,” former Bar President Ed Blumberg wrote. “…. Tampering with our time-honored practice of law will undermine the integrity and independence of the lawyer and the administration of justice writ large.”

A large chunk of the comments came from immigration lawyers who said allowing nonlawyers to provide more legal services would lead to more abuses that they see with unlicensed “notarios.” Notarios, they said, cheat clients, cause irreparable harm in many cases, and charge as much or more than lawyers.

The Family Law Section voiced concerns both about the legal lab and testing a proposal to allow paralegals to provide more services.

“There are fears this could lead to the creation of ‘mills’ analogous to the situation that arose in the wake of Florida’s recent flood of foreclosure litigation. This concern is heightened when coupled with the proposed changes to Rule 4-5.4 allowing for fee sharing with nonlawyers,” the section said in a white paper. “In summary, the Family Law Section is concerned that this is a slippery slope with systemic unintended consequences.”

The Trial Lawyers Section, in its white paper, said the lab “should have a statistical basis for insuring that consumers of legal services will not be unduly harmed.”

The section also argued if the lab eventually shut down, it would leave “irremediable licensed service providers who would not otherwise be authorized to provide legal services but may into the future with no regulation by the state Bar. This is not an outcome to be recommended to the people and businesses in the State of Florida.”

Robert Swaine, chair of the Real Property, Probate and Trust Law Section, said that the fee splitting and law firm ownership issues would raise lawyer independence, ethics, conflict, UPL, attorney-client privilege, protection of confidential client information, and several other issues. He also cited studies in other countries that have allowed nonlawyer ownership but found it did not improve access to justice.

Swaine said expanded paralegal or other nonlawyer provision of legal services should be limited to low-income areas and to limited, simpler areas of law, and lawyers providing supervision should meet certain standards.

The Workers’ Compensation Section questioned the need for the legal lab, with Chair Mark Trouby writing, “Our research into the current Utah [lab] participants revealed that many appear to be technology companies acquiring law firm interests in order to roll out computer-based and artificial intelligence legal services.”

He added there was no guarantee those operations would actually lead to more affordable legal services.

Twenty former Bar presidents signed a letter to the board urging the rejection of the fee-splitting and nonlawyer ownership recommendations.

“Nonlawyer ownership of law firms and the splitting of legal fees with nonlawyers will shift the focus of lawyers away from the administration of justice and will jeopardize the status of the judiciary as a free and independent co-equal branch of government. The lawyer is draped with the insignia of the noble and learned cause of supporting the administration of justice. The last profession in our country that should denigrate to a dishonorable calling is the legal profession,” said the letter.

It was signed by former presidents Frank Angones, Tod Aronovitz, Blumberg, Howard Coker, John DeVault, Alan Dimond, Ray Ferrero, John Frost, Ben Hill, Kelly Overstreet Johnson, Rutledge Liles, Miles McGrane, James Fox Miller, Joe Reiter, Gerald Richman, Terry Russell, Herman Russomanno, Michelle Suskauer, Burton Young, and Steve Zack.

Others expressing opposition to the special committee proposals include the Palm Beach County Bar Association, the Broward County Bar Association, the Florida Justice Association, the South Florida Chapter of the American Immigration Lawyers Association, and the Florida Justice Reform Institute.

The special committee proposals did find a few supporters. A.J. Grossman III wrote that the nonlawyer ownership proposal could help firms with the nonlegal parts of a practice.

“If a lawyer/owner can bring other non-lawyer professionals on-board in a minority ownership capacity, it will afford greater opportunities to build, improve, and streamline the business side of the delivery of legal services,” he wrote. “Having some form of non-lawyer ownership might open up more possibilities for venture capital or other capital investment to help our practices grow.”

Stewart, the committee chair, in making presentations to the board and elsewhere, has acknowledged the proposals are controversial. But he said it’s unquestioned the current legal system has failed to provide adequate access for low- and middle-income Floridians.

The legal lab, he said, would allow for testing innovative solutions with data collected on what works and what doesn’t. He also said that service providers like LegalZoom and Rocket Lawyer are completely unregulated in Florida. If they participate in the lab they would agree to regulation by the Supreme Court of their legal services, Stewart said.

Overall, the members’ comments appeared at least as lopsided as the latest Bar membership survey, which earlier this year showed that more than 80% of Bar member respondents opposed any nonlawyer ownership interest in law firms and against any fee splitting with nonlawyers.

Several commenters noted those survey results and urged the board to follow them in making its recommendations to the Supreme Court.

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