Arizona Court Says Non-Lawyers Can Invest in Law Firm

Arizona Court Says Non-Lawyers Can Invest in Law Firm

Many states are making changes to business ethics that impact lawyers. Arizona approved its first ABS or Alternative Business Structure for a law firm last month. The changes approved by the Arizona Supreme Court last year became effective on January 1, 2021. 

For lawyers and other professionals, the changes in the ethics rules were substantial. The changes in the ethics rules are intended to make access to legal services easier and more affordable for the public. The changes were recommended by the Arizona Task Force on the Delivery of Legal Services

Non-Lawyer Ownership or Investment in Law Firms

Arizona is only the second state to amend its ethics rules to allow non-lawyers to own or invest in a law firm. 

Just before Arizona took that step, the Utah Supreme Court approved reforms that included non-lawyer ownership or investment in law firms. The two-year pilot program in Utah began on August 14, 2020. Legal providers must seek approval if they wish to try new ways of providing legal services to clients. 

Unlike the regulatory sandbox approach used by Utah, the state of Arizona requires non-traditional legal businesses to go through a rigorous application process. They must obtain approval before they can begin operating. The ABS must also have an internal compliance attorney to comply with the code of conduct required for an ABS.

The task force argued that allowing alternative business structures would allow more access to the legal system by promoting competition in a free market. It would also allow legal service providers to form practices with other professionals, which could benefit the public in many ways. For example, there could be ABS models that provide less expensive legal services than hiring an attorney traditionally.

The changes allow attorneys who practice in other professions to combine their practices. For example, an attorney with a business degree may offer both business consulting services and legal services by creating an ABS. A tax accountant and a lawyer could create an ABS to offer a variety of professional and legal services related to tax law. 

Creation of Legal Paraprofessionals

The Arizona Supreme Court also modified the rules of practice to create Legal Paraprofessionals or LPs. These individuals are non-lawyers authorized to provide limited legal services to the public. LPs may also go to court with their client on matters related to their services. 

LPs practice as affiliate members of the state bar. They are subject to the same discipline process and ethical rules as attorneys. LPs may offer legal services related to several areas of law, including family law, landlord-tenant disputes, administrative law, debt collection, and other limited criminal and civil matters.

To become an LP, a person must:

  • Meet specific education requirements
  • Have a certain level of experience
  • Pass a professional examination 
  • Pass a fitness and character process 

LPs would be similar to a Nurse Practitioner in the medical field. Arizona LPs will be able to provide more legal services than LPs in other states. The goal is to provide the public with affordable legal services to ensure a greater number of people have access to legal services. 

Questions Exist About the New Changes 

Many people support the changes in Arizona’s ethics laws that allow for alternative business structures and LPs. However, some opponents argue against the changes. 

The group that reviewed the changes believes that lawyers have an ethical duty to ensure the public has access to legal services. If the rules hampered access to legal services, there is an ethical responsibility to change those rules. 

Vice Chief Justice Ann Scott Timmer chaired the task force. In a statement, vice Chief Justice Timmer said she was excited to see the launch of the first ABS entities. She stated that she was confident the arrangements would benefit the public and the legal community. 

However, Court of Appeals Division One Chief Judge Peter Swann strongly disagreed with removing the rule. Chief Judge Swann also served on the task force. He stated that addressing the systemic issues that make access to the courts expensive would be a better approach to reform. 

Chief Judge Swann argued that the attorney-client relationship is a sacred fiduciary relationship. Sharing that relationship with investors might be a conflict. He wrote that getting rid of the ethics rule and adding non-lawyers would make Arizona “a leader in the race to the bottom of legal ethics.”

Only time will reveal whether these changes benefit individuals and the legal system. You can find more information about legal service reforms in Arizona on the Arizona Judicial Branch’s website

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ABA Issues Opinion on Virtual Law Practice

ABA Issues Opinion on Virtual Law Practice

When the COVID-19 pandemic began in March of 2020, businesses had to make adjustments. Law firms were no exception. 

Instead of working in the office, attorneys and legal staff worked remotely from home. Someone typically reported to the office to pick up mail or organize files, but most communication and work were handled virtually from multiple off-site locations.

Together, we stumbled through 2020 as best we could, adapting to constant changes and trying to learn from our mistakes. It took a full year for the American Bar Association (ABA) to issue an opinion on the virtual law practice. 

Because our country is still in the grips of a global pandemic, many law firms may continue practicing virtually, at least in part. Some clients may be hesitant to come into the office. Therefore, attorneys may have no choice but to continue virtual consultations to secure new clients. 

Because we do not know how the pandemic will evolve, it is a good idea for lawyers to read and analyze the ABA’s opinion now. We never know when we might be required to operate virtually again, and we do not want to make the same mistakes regarding business ethics and technology.

What is a Virtual Practice?

The ABA Formal Opinion 498, released on March 10, 2021, defines virtual practice as a “technologically enabled law practice beyond the traditional brick-and-mortar law firm.” The ABA Model Rules of Professional Conduct allow for virtual practices. 

However, the opinion points out that while lawyers can practice law virtually, there are several ethical duties to consider when using technology. The areas of confidentiality, competence, and supervision are of particular importance. 

The opinion discusses some of the issues related to virtual practice. It points out that the ABA Model Rules of Professional Conduct provide minimum requirements and some suggestions of best practices for a virtual practice.

Commonly Implicated Model Rules of Professional Conduct

The opinion discusses specific Model rules related to:

Competence, Diligence, and Communication 

The Model Rules require that attorneys keep informed about changes in the law and its practice. This duty includes the benefits and risks of relevant technology. 

Therefore, attorneys should take steps to ensure they are aware of changes. They need to comply with continuing legal education requirements and research the matter independently. 

Attorneys also must ensure they exercise due diligence on behalf of their clients. Lawyers must communicate regularly with their clients regarding the status of their matters. 

Lawyers have a duty to pursue a matter, despite any obstruction, opposition, or personal inconvenience. Clients have a right to be consulted about their case and receive the information they request.

Attorneys need to develop plans that ensure they can comply with these requirements, even if they practice virtually.

Confidentiality

Model Rule 1.6 prohibits lawyers from revealing information related to representing a client. The duty persists even if an attorney is practicing virtually. There must be informed consent, a specific exception, or implied authorization for the attorney to discuss client matters.

An attorney must make reasonable steps to protect client confidentiality. 

According to the ABA Formal Opinion, a lawyer should consider:

  • The sensitivity of the information
  • The cost of employing additional safeguards
  • Likelihood of disclosure if no other safeguards are installed
  • The extent to which the safeguards negatively impact the representation of clients
  • The difficulty in applying the safeguards 

A virtual practice adds additional concerns related to confidentiality. Transmitting documents virtually poses a risk of disclosure. Discussing information online could result in breaches of confidential information. Additional steps may be required to protect confidentiality in a virtual practice.

Supervision

Lawyers have a duty to ensure nonlawyer staff members and subordinate lawyers comply with ethics rules. Practicing virtually does not lessen the attorney’s duty. 

An attorney should instruct employees about ethics, especially related to confidentiality. Employees should understand the rules about safeguarding information. They must avoid inadvertent disclosure or unauthorized access to client information. 

Other Matters Covered by the ABA Formal Opinion for Virtual Practice

There are several other topics covered in the ABA Formal Opinion, including:

  • Hardware and software systems
  • Accessing client data and files
  • Videoconferencing and virtual meeting platforms
  • Virtual data and document exchange platforms
  • Virtual Assistants, Smart Speakers, and other listening-enabled devices
  • Supervision

The opinion also discusses the possible limitations of virtual practice. Virtual practices may not be suitable for all areas of law or law firms. 

The Bottom Line

Attorneys are expected to follow all ethics rules. They must continue fulfilling their duty of care. These requirements exist regardless of whether they are virtual or meet with clients in a traditional law firm setting. It is up to each attorney to ensure compliance with the rules for themselves and their staff members. 

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What Lawyers Can and Can't Say on Their Websites

What Lawyers Can and Can’t Say on Their Websites

Every state has its own bar association, and every bar association sets its own legal and ethical rules regarding legal advertising. In addition, the American Bar Association is an overarching association which often sets standards and rules adopted by states individually.

Issues around legal advertising fall into three broad categories:

  • What is legal or illegal?
  • What is ethical or unethical?
  • What is simply good or bad advertising?

It is of vital importance that a lawyer knows the rules, laws, and responsibilities that apply in the jurisdiction in which they practice. These rules, laws, and responsibilities will govern what an attorney may or may not say on their website. Often, a person will hire a blogger to provide content for their website. That attorney is ultimately responsible for every word on their website.

The Role of Blogging in Legal Advertising

So much of the legal profession uses blogging as one of the primary tools of legal advertising these days. Blogging imparts information in a way that engages a reader regarding an area of the law that a person may have an interest in. With the advent of legal blogging, attorneys have had to be careful to ensure that the boundaries of client confidentiality are kept. This is particularly true when a blogger uses hypotheticals. Those hypotheticals must not allow a person reading the blog to identify a client or that client’s situation. That is the gist of the American Bar Association’s Formal Opinion 480.

These admonitions also pertain to other “public commentary” by attorneys in online forums such as listservs, articles, postings, and platforms such as Twitter which allow micro-posts.

Disclaimers Help

Those attorneys who use a website as part of their legal advertising must be particularly careful of two things. First, you must be careful not to establish an attorney-client relationship by virtue of any contact made by a client on the website. This could be a matter of a person emailing the firm and asking for advice. It could be a “contact us” blank form on the website that allows a person to contact an attorney at the firm. A disclaimer that specifies that such conduct does not form an attorney-client relationship should be somewhere on the site.

Likewise, because most attorney websites use blogs as a way to connect with potential clients, you must be careful not to have a client misconstrue the blog’s content. A disclaimer, prominently placed on the site, stating that the blog is not dispensing legal advice, but rather is only providing general information is helpful. The disclaimer should also state that a person should contact the attorney directly.

Some state bar associations require these disclaimers. An attorney should check the rules in their jurisdiction and monitor their websites for compliance.

Misleading Information

The Model Rules of Professional Conduct, particularly Rules 7.1 and 7.2, adopted by most jurisdictions, and laws against fraud prohibit the use of materially misleading statements or information on an attorney’s website.

This includes overt statements and omitted facts.  This can have implications for client testimonials, and in general how an attorney talks about the services they provide. This requires that lawyers be truthful and avoid exaggerations or “puffing” in describing their skills or results. Tooting your own horn with a statement like, “we are the best in town,” may be allowable if you are in used car sales but may run afoul of the state bar association.

Claims of Expertise

Lawyers must be careful about claiming expertise. Most bar associations offer certification in particular areas of practice. Gaining certification usually requires some degree of additional training, testing, and peer review. Lawyers who claim expertise without having the appropriate certification, run the risk of being sanctioned by their bar association.

As examples, these statements run from the most to the least problematic regarding expertise:

  • “We are certified experts”
  • “We are experts in our field”
  • “We specialize in our field”
  • “We focus on this area”
  • “We practice in this area”

Claims of expertise, like the puffing of skills or case results, can unduly misrepresent an attorney’s skills, unfairly sway a potential client to hire the lawyer, and unwittingly “guarantee” a particular result for a client.

Comparison to Other Attorneys

Claims of being “the best” or “the best in town” and the like can get an attorney sued. An attorney must be careful to never put anything on their website that is not true. Claims of being “the best” are not easily verifiable. How does one determine who is “the best?” It is at best, subjective puffery. Vulnerable clients who need help can be easily swayed by these statements.

Guaranteeing Results

Like comparisons to other attorneys, statements guaranteeing results are highly problematic. These statements are sometimes overt, such as “we will win your case for you.” Other times, they are more subtle, “we will get you what you deserve.” No lawyer may ethically guarantee a result without running afoul of ethics rules. Any statement that leads a client or may lead a client to form unjustified expectations regarding results is prohibited.

What a lawyer can do is talk honestly about their experience in a particular area of representation. For example, if a firm practices only in the area of personal injury, an attorney can state  “personal injury, it’s all we do.” The statement is factual. Likewise, a website can state the number of wins at trial for a specified time period as long as the statement is true. Such a statement may be something like “we tried 100 cases in the last year and won 75.”

Final Thoughts

Websites are an increasingly important tool used by attorneys for advertising their practices. Attorneys must remain vigilant regarding compliance in their websites. Without adherence to ethical and legal standards, attorneys open themselves to the possibility of being sued for malpractice. Caution taken now can prevent a headache later. 

 

 

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Business Ethics Pledge

“Whenever you do a thing, act as if all the world were watching.”
– Thomas Jefferson

25,000 Influencers Wanted to Take the Ethical Business Pledge—Change History!
Show the Business World How to Succeed by Being Ethical and Cooperative

Will you be a part of the movement to change the world of business?

  • To make the next Enron so unacceptable that it won’t happen?
  • To create a business climate where people at nearly every business in the world can hold their heads up high and be proud of what they do—and the remainder rise up in rebellion at the crooked practices of their employers?

In short, will you help create a moral code of business ethics based on honesty, integrity, and quality?

This is about changing the world! About creating a climate where businesses are expected to behave ethically, and where executives who try to drag their companies into the unethical swamplands find that nobody’s willing to carry out their orders.

I believe that if I can get 25,000 business leaders—25,000 people to make a commitment to spread the ideas in Guerrilla Marketing Goes Green, that we can change the culture of business. Following the ideas expressed in the book The Tipping Point, and the story of the 100th Monkey, I feel, deep in my heart, that once a critical mass embraces the idea that high ethical standards are not only possible, but actually more profitable, society will change.

Some of those key ideas (among many) include:

  • Businesses are more likely to succeed when they base themselves in ethics—in honesty, integrity, and quality
  • Businesses must look at the “triple bottom line”: financial, environmental, and social impacts (and this will require major pressure: currently, US public corporations are required by law to focus only on the economic bottom line, to the exclusion of other objectives and stakeholders)
  • Amazing things can happen when all stakeholders (employees, customers, suppliers, neighborhood residents, even competitors) become your active champions-but that only happens if your business specifically empowers each of these groups and addresses their different needs and desires
  • Line employees, managers, and even CEOs need support to show that ethical principles will help their businesses succeed, and that they won’t be penalized by the marketplace for taking an ethical stand

Society changes when enough people decide that something is seriously wrong…and when they feel empowered to do something about it. In my own lifetime, we’ve seen critical masses arise and succeed, over and over. For example

  • Blacks and whites joined together to desegregate the southern United States
  • People’s movements tore down the Berlin Wall and the entire network of totalitarian Soviet governments
  • South Africa peacefully threw off the shackles of apartheid and freed Nelson Mandela from prison to be its first democratically elected President

All of these struggles started with a few people, but spiraled outward to become an unstoppable movement for justice once enough people started to believe and to act. Ordinary people in Montgomery, in Gdansk, in Soweto, in so many other places, decided that things had to change—and they changed!

Now, after years of corporate scandals, it’s time to say, as those ordinary people did before us, that things have to change. I wrote and published my book, Guerrilla Marketing Goes Green, to help create that change. If businesses see that it’s actually in their financial interest to do the right thing, that this will motivate change in executive boardrooms, in stockholder meetings, and in the press.

Eventually, this movement will reach critical mass. And some crooked “entrepreneur” will come along and try to cheat employees and customers while leaving a big, expensive mess for the public to clean up. But that crooked business owner won’t find the people who will carry out this dirty work. Instead, good people will stand up for what’s right-for ethics, for justice, and for honoring the company’s real mission-not only because it’s the right thing to do, but because they understand that it works better.

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