Déjà vu: The American Bar Association revisits alternative business structures

Last month the American Bar Association — the world’s largest bar association with approximately 400,000 members — wrapped up its annual midyear meeting, this year in Austin, Texas. Amongst the many matters tabled and voted on by the almost six hundred delegates was a resolution, tabled by its Center for Innovation committee, endorsing reforms to encourage variations of non-lawyer ownership of law firms. This is still lovingly referred to by many on both sides of the border as Alternative Business Structures, or ABS.

Now, this is not the first time that the ABA has taken a serious look at ABS. In 2014, the ABA created the Commission on the Future of Legal Services, which issued a report in 2016 endorsing various forms of ABS. The 2016 report was debated at length, met with considerable opposition from the grassroots membership, and ultimately not adopted by the ABA. The ABA’s Committee on Ethics 20/20 had previously visited the ABS issue as far back as 2011 and issued a position paper (which was not favourable to ABS) at that time.

So what is different this time? Well, according to the Chairman of the Center for Innovation committee, Daniel Rodriguez, the current recommendations in favour of ABS should be viewed with “an eye to access to justice.” Sound familiar? It should. The Law Society of Ontario spent several years considering the exact same issue using the exact same “access to justice” lens. Guess what? The Law Society of Ontario’s ABS Working Group concluded that there really was no credible argument that the introduction of the commonly touted ABS models would have any meaningful impact on “access to justice.” In a report released in September 2015 and presented to Convocation, the ABS Working Group concluded:

Based on its work to date, the Working Group does not propose to further examine any majority or controlling non-licensee ownership models for traditional law firms in Ontario at this time. Such non-licensee ownership levels do not appear to be warranted based on current information when the potential benefits to such external ownership levels are weighed against the regulatory risks and regulatory proportionality.

For a couple of more years the ABS Working Group continued to develop rules allowing some ABS structures in Ontario — for charities, not-for-profits and trade unions — and these rules are currently in effect in Ontario. It is fair to say, however, that, while the ABS Working Group started its mandate like a lion, looking to usher in a new era of mainstream ABS in Ontario, it ended it like a lamb, issuing some relatively uncontentious rule changes for the benefit of a comparatively few civil society organizations.

This is not an indictment of the LSO’s ABS Working Group. Indeed, quite the contrary; it is a compliment to the working group’s impartiality. While the literature at first seemed promising, suggesting that ABS was some sort of a silver bullet for the problem of “access to justice,” it readily became apparent to the working group that, in reality, ABS did no such thing.

Will American states respond to the ABA’s resolution to permit ABS now that the issue has been reframed as an answer to “access to justice”? In the movie Miss Congeniality the Sandra Bullock character, an F.B.I. agent who goes undercover as a beauty pageant contestant, finds her pageant answers are well received if she adds the phrase “and world peace.” The ABA resolution attempts to do the same thing by reintroducing the ABS issue with the suffix “and access to justice.” It worked for Sandra Bullock. It might work for the ABA.

Time will tell. Even before this year’s resolution, some U.S. jurisdictions (e.g., the District of Columbia, and Washington state) already permitted some variations of ABS, and several U.S. other jurisdictions were already actively investigating ABS possibilities (e.g. California, Utah and Arizona).

That said, it is hard to see how anyone will come up with a conclusion that is materially different from that of the Law Society of Ontario’s ABS Working Group. Whatever other benefits that ABS might provide, such benefits will not include a material impact on “access to justice” (or, for that matter, “world peace”).