Law is a profession and an industry: It should be regulated that way

Mark Cohen’s title Law is a profession and an industry: It should be regulated that way states what we all recognize, but somehow do precious little to regulate in an appropriate way, denying opportunities for clients and lawyers to create more value for society. Lawyers in the US, the world’s largest legal market, regulate both. Regulation of the practice of law and the business of law should be bifurcated. Let lawyers regulate practice and independent business professionals oversee the industry. Conflation of the two is detrimental to the profession, the industry, and society.

The ‘Profession’ and the ‘Industry’

The legal ‘profession’ refers to lawyers—their training, licensure, ethical responsibilities, client obligations, and other practice-related matters. The profession is about the zealous, ethical representation of individual clients. Lawyers also enter into a social compact to represent society by defending the rule of law. Legal practice is the differentiated legal expertise, judgment, and skills possessed by some—but not all—lawyers. Regulation of the profession should ensure adherence to ethical and practice standards on behalf of individual clients and society at large.

The ‘industry’ describes the inter-disciplinary, tech-enabled, one trillion-dollar global business of delivering legal services. The business of law is about using technology and process to identify and automate repetitive tasks, ‘productize’ routinized functions, streamline efficiency, promote transparency and diversity, compress delivery cycles, and provide legal buyers with ‘more for less’ within acceptable risk parameters. Legal delivery is an amalgam of legal, technological, and process expertise and deploying the appropriate resource—human and/or machine—to a task/matter/portfolio. Regulation of the industry should provide flexibility to structure delivery and economic models that align providers with legal buyers, enhance competition, and promote innovation. The objectives of industry regulation should be to promote competition, encourage innovation, and allow formation  of delivery models that enhance access to and improve delivery of legal services.

The changing role of lawyers

Legal practice was once synonymous with legal delivery. Law was about legal expertise and nothing else, so lawyers were well-suited to define and enforce practice standards. The global financial crisis and remarkable advances in technology changed the way goods and services are bought and sold. Even the insular, staid, conservative, self-regulated legal industry could not immunize itself from these powerful socio-economic forces.

The post-crash, tech-enabled business community engaged in serious belt-synching and adopted a ‘more with less’ mantra. This impacted the delivery of legal services in several ways: (1) disaggregation accelerated—‘legal’ work migrated from law firms to corporate legal departments and non-law firm providers; (2) legal buyers– not lawyers—determined what a ‘legal matter’ is and when, from what delivery and economic models, and at what price lawyers are required; (3) corporate legal departments and law companies—unlike firms–operate with corporate structures and performance standards/reward systems that promote a long-term view by providing stakeholders with residual equity and reward outcome, not input; (4) the myth of ‘lawyer exceptionalism’ has been debunked and so too has the hegemony of law firms; and (5) legal delivery requires not only legal expertise but also technological and business acumen.

Technology has played a significant role in altering legal delivery. Machines are not replacing lawyers, but technology is casting a bright light on what tasks require licensed attorneys, the expertise and level of experience needed, the appropriate provider, the resources—human and/or machine—they collaborate with, and the price. Many legal services have morphed into products, and delivery is about efficiency and measurable outcome, not labor intensity and hours billed or origination.  Lawyers are not being marginalized, but their hegemony over all facets of ‘legal’ work is. What is and is not legal practice is secondary to the expertise required. The default answer is no longer lawyers. This begs the question: what does it mean to be a lawyer now?

The American Bar Association (ABA) describes a lawyer as: “a licensed professional who advises and represents others in legal matters.“ This description raises more questions than it answers and fails the ‘void for vagueness’ standard. It sidesteps several key issues: (1) what is a ‘legal matter’? (2) Who makes that call? (3) when are lawyers required? (4) what differentiates a lawyer from other resources—human and machine—in the legal supply chain? (5) why can’t most individuals and small businesses afford lawyers? (6) is there a difference between the practice of law and the delivery of legal services? (7) is the legal profession the same as the legal industry? and (8) what purpose do lawyers serve?

Self-regulation by lawyers conflates practice and delivery. This has a negative impact upon tens of millions denied access to legal services, existing legal consumers, and society. State Bars—especially voluntary ones that rely upon dues-paying lawyers for subsistence—have repeatedly slapped law companies like LegalZoom and Rocket Lawyer with unauthorized practice of law (UPL) claims. Not only have these UPL actions largely failed, but they also overlook the consumer perspective as well as the exceedingly high customer satisfaction ratings of the providers. Sometimes– contrary to what most lawyers are trained to believe– ‘good is good enough.’

The value of independent regulators: The UK bifurcated model

The UK, the world’s second largest legal market, faced many of the same challenges as the US in the early years of the new Millennium—an access to justice crisis, widespread consumer dissatisfaction with lawyers,  lack of competition, and a self-regulated legal industry that functioned as a monopoly. The Government authorized a two-year independent, no-holds-barred review of the legal industry conducted by Sir David Clementi, a banker and CEO of an insurance conglomerate. ‘The Clementi Report’ became the backbone of the Legal Services Act of 2007 (LSA) that produced re-regulation of the legal industry. Acting on the findings of Clementi, the Government determined that the self-regulated legal industry operated as a guild that failed to serve the public adequately. The LSA created the Solicitors Regulatory Authority (SRA) to oversee the business side of the legal industry, leaving regulation of practice matters to The Law Society. The centerpiece of the SRA’s re-regulation was its creation of ‘alternative business structures’ (ABS). This abolished the long-standing prohibition of ‘non-lawyers’ from owning, operating, or investing in law firms. ABS, already in effect in Australia for nearly a decade, kick-started competition, new delivery models, investment in the legal industry, and, most importantly, provided the consumer with more and better delivery options.

The U.S. has three times declined to follow the UK example during the past two decades. Voluntary State Bars have led the opposition, citing compromise of lawyer independence as the principal objection to re-regulation. Not only are the alleged ‘conflicts’ already at play, but also the record of self-regulation leaves much to be desired. Regulatory stasis means  unnecessary impediments to amelioration of the access to justice crisis, widespread consumer dissatisfaction, reduced competition and innovation, and further erosion of public confidence in the rule of law. The remarkable rise of the Corporate Legal Operations Consortium (CLOC), the steady migration of work from law firms to in-house departments and law companies, the legal supply chain, the increasing role of procurement in legal buy decisions, and law’s accelerating digitization indicate that de facto re-regulation of the corporate segment of the legal industry is well underway. The retail segment is in dire need of regulatory reform that recognizes that many ‘legal’ needs can be satisfied in a variety of ways that diverge from the traditional lawyer-centric approach. The Supreme Court’s decision in North Carolina State Board of Dental Examiners, and the Justice Department’s recent warning shot at state bars that think they are immune from antitrust claims just because they are an arm of their state supreme courts suggest that current regulations are on shaky legal foundations.

Conclusion: Law is a profession and an industry: It should be regulated that way

The legal profession has been subsumed by the industry. Law is following the path of other professions-turned-industries, notably medicine that morphed from small practices to the healthcare industry. Just as physicians practice within the healthcare industry, so too will lawyers cease practice from the cocoon of their self-regulated guild. Lawyers should not be left to regulate the legal industry on their own.

Lawyers are part of a legal supply chain that is populated by other professionals, paraprofessionals, and machines. They routinely collaborate with the very ‘non-lawyers’ the have fought so hard to keep out. There’s no going back. Consumers want solutions to business challenges, not legal tomes. Answers to those challenges are no longer derived solely from legal expertise housed in law firms. Solutions increasingly come from different provider sources with different skillsets that collaborate with law firms, effectively rendering moot regulatory prohibitions. It’s time to put an end to the work-around charade and craft regulations that better serve consumers and the rule of law.

The core tenets of legal practice—confidentiality, conflict avoidance, etc.—have changed little over time, even as new challenges arise. Lawyers are well-suited to regulate themselves.  But the business of delivering legal services in an increasingly corporatized, digitized, inter-connected, complex world requires outside regulators whose focus is on consumers, not lawyers. Regulation should encourage new delivery models, investment capital, and innovation that promote access and elevate legal buyer satisfaction. The legal industry has the resources to better serve consumers and society. Bifurcation of legal regulation will advance these important objectives and preserve the fundamental characteristics of legal practice.

 Author

Mark Cohen is a lawyer, law professor, legal innovator and strategist, and founder of Legal Mosaic. Mark says of himself “I write about changes in the global legal marketplace”.

Law is a profession and an industry: It should be regulated that way was originally published in Forbes, then on Mark’s blog Essays and Services on Legal Delivery on 2 April 2018.