Annual Meeting

Sharing fees with nonlawyers is inconsistent with profession's 'core values,' ABA House says

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On Tuesday, the ABA House of Delegates reaffirmed its position on the sharing of legal fees with nonlawyers, passing a resolution stating the practice is “inconsistent with the core values of the legal profession.”

It was anticipated that Resolution 402 would lead to extended debate. But by the time an amendment was introduced on the floor of the House of Delegates at the Hyatt Regency in Chicago, opposition was dampened, and the resolution passed overwhelmingly.

Additional language reaffirmed the “core values” in the ABA’s Model Rule of Professional Conduct 5.4. and said that “nothing in the resolution” should be interpreted as undermining Resolution 115.

Resolution 115, which was passed in 2020, encouraged regulatory innovation to expand access to justice.

Former ABA President Patricia Lee Refo spoke for the purposes of making the amendment.

“This reminds us that the model rules remain the guiding principles for our profession, and as reflected in Resolution 115, we encourage states to innovate and to experiment,” Refo said. “And we will measure the results of that innovation and those experiments to determine a future course.”

The resolution’s report notes that advocates of allowing nonlawyers into the practice of law argue it could improve service to clients, help promote diversity and expand access to justice.

Delegate John E. Thies of the Illinois State Bar Association spoke in support of the resolution, cautioning it should not be construed as anti-innovation.

Thies also warned against the “drip, drip, drip” of eroding rule 5.4. He said allowing nonlawyers into the practice of law could “destroy our profession, to the huge detriment of the public and client interest.”

Resolution 402 also sought to reaffirm a House of Delegates resolution from 2000 on the sharing of legal fees with nonlawyers.

“The law governing lawyers that prohibits lawyers from sharing legal fees with nonlawyers and from directly or indirectly transferring to nonlawyers ownership or control over entities practicing law should not be revised,” Resolution 402 states.

Some access-to-justice advocates say rules restricting nonlawyers should be loosened so states can provide basic and affordable legal services to more middle-class and low-income Americans.

Follow along with the ABA Journal’s coverage of the 2022 ABA Annual Meeting here.

But the resolution’s report said that it is important to reaffirm the 22-year-old resolution, known as Resolution 10F, or Resolution 00A10F.

“Innovation can be effectuated without abandoning core values that have strong implications for assuring that the practice of law remains a learned and independent profession that serves the public and defends justice,” the Resolution 402 report says.

The report argues that allowing nonlawyers to share legal fees poses a “threat to clients and our system of justice.”

According to the report, among other things, allowing nonlawyers would undermine the courts’ authority to regulate the legal profession. The report also argues that the “rigorous training” lawyers must go through and standards of ethics and accountability could be compromised because nonlawyers are not held to the same standards.

It also raises the prospect of conflicts of interest, and says that fee-splitting between lawyers and nonlawyers could erode lawyers’ “independence and control.”

According to a 2022 report by Legal Services Corporation, low-income Americans believe they go without any or enough legal help for 92% of their legal problems.

And about 30 million people lacked adequate representation in state courts, the Justice Lab at Georgetown Law Center said in a 2019 report.

In August 2020, Arizona became the first state to entirely eliminate state bar rules banning nonlawyers from having an interest in law firms after its supreme court weighed in on the matter.

Utah has also allowed nonlawyer ownership of firms.

The state’s legal reforms provided that law firms could share legal fees with nonlawyers, according to a 2021 article in the ABA Solo, Small Firm and General Practice Division’s Litigation News.

The first Utah-based firm owned wholly by nonlawyers opened in March 2021.

As he urged the other delegates to adopt the resolution, Thies said he cared “deeply” about improving access to justice.

“Everyone in this room is 10 times more concerned about access to justice than outsiders seeking to profit from legal services,” Thies said.

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