Access-to-justice gap? It's the economy
In November, the ABA published Formal Opinion 484. From the ABA Standing Committee on Ethics and Professional Responsibility, the opinion approves of some forms of attorney fee financing, believing that they can help close the access-to-justice gap, defined as those who need but can’t attain legal support.
“Formal Opinion 484 is important because it addresses a way to increase access to legal services for those persons who may wish to or need to finance legal fees in order to retain counsel,” says Barbara S. Gillers, chair of the standing committee.
Others I spoke with about the opinion echoed this sentiment. The argument is that loans at about a 10 percent rate can help some people get through their criminal defense, eviction or employment dispute.
Even though there is little data on use and impact of this type of financing, the opinion–and the conversations I had about it–prodded at my growing disillusionment around the narrowness of the debate about the access-to-justice gap.
Time and again, the proposed solutions to close the gap—whether loans, technology, professional rule changes, process and business model improvements—are missing the larger point. The access-to-justice gap doesn’t exist because of absence of loans or the lack of technology or the intractable billable hour. It exists—and continues to grow—because the cost of life in America has increased dramatically while wages for most Americans have been stagnant or even falling for decades.
In the decade since the official end of the Great Recession, the market has experienced longest bull run in history coupled with record unemployment creating extraordinary new wealth. Yet, Federal Reserve Chairman Jerome Powell said in a speech this month that “the benefits of this strong economy and sound financial system have not reached all Americans. The aggregate statistics tend to mask important disparities by income, race, and geography.”
Civil legal access seems to have missed the boat, as well. The World Justice Project, which tracks the rule of law, including access to legal counsel, has seen the a decline in American’s ability to access counsel between its reports in 2010 and 2018.
Those in the gap are not just people in dire economic straits, of which 86 percent receive inadequate or no civil legal help. Only 39 percent of middle income respondents to an ABA survey turned to the legal system when dealing with a civil issue.
In part, this is because the middle class has been decimated since the 1970s. According to PEW Social Trends, between 1971 and 2014, the share of aggregate income held by middle income households—defined as a family of four in 2014 making at least $48,347—shrunk from 62 percent of the total population to 43 percent. At the same time, upper income households—a family of four making at least $145,041 in 2014—went from having 29 percent of the aggregate household income to 49 percent. The financially worst off among us kept steady at nine percent of aggregate income, but their share of the U.S. population grew by 25 percent during the same period.
This redistribution of wealth to the richest is facilitated and compounded by numerous factors. Between 2000 and 2012, median income for all families dropped eight percent while common expenses increased, like childcare (24 percent), higher education (62 percent), rent (seven percent) and medical expenses (21 percent), according to the Brookings Institute. Adding insult to middle class injury, federal tax cuts this century have disproportionately benefited the rich, according to the Center on Budget and Policy Priorities. And to top it all off, the power of labor unions—once a means to lift families into the middle class—has received heavy blows from decisions like Janus v. AFSCME.
These economic realities have affected most Americans and acutely impacted the Millennial generation. Millennials—often derided by older Americans that engineered the current economy—are poorer than the Baby Boom and Generation X cohorts, according to a recent report by the Federal Reserve. As Millennials become the largest segment of the economy, their economic uncertainty should worry attorneys.
One recent survey found, regardless of economic class and generation, 91 percent of respondents believed that lawyers’ fees were “extremely expensive” and 82 percent wanted alternatives to attorneys when dealing with small legal matters.
At the same time, lawyers continue to increase their rates. The LexisNexis CounselLink Enterprise Legal Management Trends Report has consistently found rates go up as much as four percent year-over-year in some jurisdictions.
“Rates always increase. In the five years we’ve been doing the analysis we always see an increase,” Kristina Satkunas, director of strategic consulting at LexisNexis’ CounselLink, told Law360 earlier this year. “But no matter how I sliced it, whether I was looking at the size of firms, cities, type of work, the increases were higher this year.”
With limited alternatives, clients are turning to consumer loans to cover legal fees, a trend that should be embraced cautiously—if at all—regardless of the practice’s ethics.
If history serves as any guide, the general economic instability of Americans is not solved by more debt. In fact, the opposite is true, as debt allows system failures and economic fissures to persist and fester, which can lead to economic calamity, like the 2008 housing crisis.
“Ten years ago, a lot of the problems economically for households were sort of covered up in debt,” John Thompson, chief program officer at the Center for Financial Services Innovation, told the American Banker. “And it sort of feels like that’s starting to happen again,” he says of American consumer debt generally.
As of late 2018, Americans held $13.5 trillion in personal debt, according to Nerd Wallet.
Both due to the economic realities surrounding most Americans and our unhealthy relationship with consumer debt, it’s particularly hard to see how legal fee financing, of all the proposals to close the access-to-justice gap, is the solution. Legal fee financing is not alone in missing the larger issue, however, the broader conversation around access to justice would be better suited if it focused on foundational economic issues.
Bringing back unions—or finding another means to buoy labor—would decrease the justice gap in a way that improving access to legal fee loans or online tools never will. Making health care affordable, creating an equitable tax code or increasing the minimum wage would give people more money to solve their problems, including legal ones.
While these are not zero-sum trade-offs, the point is that a more holistic view of the justice gap and how to close it can help families dig out from decades of economic attrition and ultimately bring financially healthy clients back to the legal profession.
Only by expanding justice in our economy will we ever allow more people to find justice in court.
Jason Tashea is the author of the Law Scribbler column and a legal affairs writer for the ABA Journal. Follow him on Twitter @LawScribbler.