ABA Techshow

Permitting alternative business structures could spur tech innovation, Arizona justice says

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Ann A. Scott Timmer

Arizona Supreme Court Vice Chief Justice Ann A. Scott Timmer. Photo by Bob Torrez/ABA Journal.

Arizona is hopeful that its decision to permit alternative business structures in the law will produce greater technological innovation within the legal industry, said Arizona Supreme Court Vice Chief Justice Ann A. Scott Timmer during the ABA Techshow 2021 on Monday.

Timmer also expressed optimism that her court’s unanimous vote in August 2020 to eliminate Arizona Rule of Professional Conduct 5.4 barring nonlawyer ownership and investment in law firms will lead to greater access to justice and defended the court’s action.

“We found as a task force, and later as a court, that this rule really protected the lawyers and not the public,” said Timmer, who chaired the Arizona Task Force on the Delivery of Legal Services and was named a 2021 ABA Journal Legal Rebel.

The elimination of the controversial ethics rule took effect Jan. 1, and Arizona has begun accepting applications from proposed alternative business structures.

While the initial wave of applicants is likely to be more along the lines of traditional law firms adding nonlawyer personnel, Timmer said she has heard of tech companies “interested in infusing money into existing law firms to expand their technological wherewithal, so that they can reach more people [and] so that they can have more of a high volume business for what they are doing.”

Follow along with the ABA Journal’s coverage of the ABA Techshow 2021 here.

Timmer also noted that Rocket Lawyer has been accepted into Utah’s sandbox program for alternative business structures that launched last summer, and she expressed hope that it may want to pursue an alternative license in Arizona, too. She mentioned LegalZoom and Elevate as other examples of legal tech companies that may find Arizona’s approach enticing.

Additionally, Timmer described speaking to task forces in several other states examining whether to allow alternative business structures in the law, a development she said is a “consequence of the fact that people know what we are doing now isn’t working for everyone, and there is more that can be done.”

“I think Arizona and Utah in particular will be a bit of a test case, and all eyes will be on us in the next few years to see how is this going to work out,” Timmer added.

On Tuesday, Arizona’s Committee on Alternative Business Structures voted to recommend for initial licensure two alternative business structure applicants. One is Trajan Estate, which will operate as a traditional law firm featuring 50% nonlawyer ownership. The other is Payne Huebsch, which intends to add legal services to the accounting and tax services it presently provides.

The Arizona Supreme Court will have the final say on whether to grant the recommended alternative business structure licenses. The two applicants recommended for approval would be the first alternative structures licensed in Arizona, according to state supreme court spokesman Aaron Nash.

Updated March 9 to include Tuesday’s recommendation.

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