ABS: Why law students care

By Douglas Judson Web Only

Alternative business structures hold a lot of promise for both a new generation of legal professionals and the society they will serve.

ABS: Why law students care

Douglas Judson, President of the Law Students' Society of Ontario

Recently, the Law Society of Upper Canada (LSUC) called for input on whether (and to what degree) it should allow alternative business structures (ABS) for the delivery of legal services in Ontario. The profession has taken a particular interest in a paper on the topic from the Law Students' Society of Ontario (LSSO), which favours ABS. With some caveats and cautions, the LSSO concluded that permitting non-lawyer ownership provides both a compelling opportunity to improve access to justice and a strong business case for legal enterprise. We encouraged LSUC to adopt a liberal approach to ABS, with necessary regulatory intrusions to address valid professionalism concerns.

The regulatory objective

If the response of the legal Twitterati is any signal, it appears that lawyers remain divided on the subject. At minimum, many opinions remain in chrysalis. Some of those who favour the status quo have unfortunately chosen not just to challenge our thoughts on the business of law, but instead to undermine the LSSO’s standing to participate in the discussion in the first place. It is, sadly, not an uncommon approach.

By the same token, perhaps the pushback on ABS indicates that we are on to something. It also suggests that those opposed to ABS are discounting our shared concern for the longevity and relevance of the profession we will soon join. These critics seem content to overlook the Law Society's invitation for comments from stakeholders and its mandate to make decisions that reflect the interests of the public  - both groups in which the LSSO is conveniently situated.

That said, our ABS ideas are no radical manifesto. To an extent, our paper is a restatement of the profession's governing legislation. Read together, sections 4.1 and 4.2 of the Law Society Act requires the Law Society to carry out its regulatory functions in alignment with the public interest, access to legal services, and access to justice principles. These objects are not just peripheral goals - they provide the rubric that ABS ought to be scored against. ABS furthers these objectives by allowing a wider array of service providers, service models, and efficiency gains. Greater choice for consumers and competition on new dimensions is inherently in the public interest. Even if permitted by LSUC, adopting a new structure is not mandatory for individual firms. In the U.K., where legislation allows ABS, there are presently just over 300 ABS registrants, evincing a continued place for traditional structures.

Back in Ontario, our Act goes on to specify that restrictions on who may provide particular legal services must be proportionate to the significance of the regulatory objectives sought to be realized. The language suggests that the question before the Law Society is not whether to liberalize the range of permitted business structures, but rather to examine whether the regulatory objective at stake justifies the continuation of a complete ban of common business structures that are available in other industries. This is particularly so in light of less imposing rules in jurisdictions with similar legal traditions, and compelling evidence that ABS has made a positive impact on legal services within those borders. It seems unlikely that "because that's the way it's always been" satisfies the necessary threshold. Such parapets may be crumbling.

Those counting on the white knight of professionalism or the sanctity of duties to clients and courts to protect the status quo may be similarly disappointed. These legal values can be reinforced by targeted rules, which other jurisdictions have implemented successfully. In New South Wales, Australia, for example, professionalism-related complaints have actually decreased with the onset of ABS. Others protest that the areas of law most likely to be subsumed by new ABS-powered industry participants are not those where individuals experience challenges to accessing legal services. This might be because some of those areas have become compulsory steps in various transactions. These critics also fail to acknowledge that all innovation needs a foothold. Civilization would not have come very far had the first wheel been discarded for lack of inflated rubber, or the low fruit was left to rot for want of a ladder. Even the most primitive service improvement carries some public interest virtue, so the threshold to find value in permitting ABS may not be monumental.

A renewed opportunity

Yet, debates about statutes and professional regulations don’t strike at the heart of students’ interest in ABS. Rather, our interest is rooted in our enthusiasm and ambition for improving the delivery and affordability of legal services and the accessibility of law and justice. Full stop. For many of us, the desire to be part of 'big changes' and to make a systemic impact on social, equitable, and economic issues was our primary motivation for pursuing a legal career to begin with. Today’s law schools contain a more selective and accomplished crop of students than ever before, and their applications and studies reflect a desire to influence and reshape institutions, industries, and society. The legal industry itself is more of a ‘usual suspect’ than an exception to our axe-grinding ambitions. We idealize a conception of law that is more participatory, and necessarily less isolationist.

If law school shatters any of these neophyte delusions, ABS signifies a renewed opportunity to pursue these goals after we join the profession. It captures the imagination because it is quintessentially about entrepreneurship and innovation. Through alternative structures for legal services and non-lawyer ownership, the profession can open the door to new dimensions of firm differentiation and value-added services, and new incentive structures for lawyers and non-lawyers to take part in improving their firm's work processes and service delivery. It is plain to students that now, more than at any other time in the life of the legal profession, the sophistication of technology and the professionalization of management functions underscores a need for a wider range of permitted business structures. Lawyers cannot do it all, nor can they expect others to step up without the opportunity to fully participate in the value-creating upside of their talents.

The entrepreneurship we speak of isn’t just needless turbulence – new entrants and ideas can create new opportunities for aspiring professionals. By the LSUC ABS Working Group's own admission, the present market for legal services is narrow, crowded, and contested on few dimensions. One recent study found that only 12 percent of Canadian sought legal help for a justiciable issue they encountered in the previous three years. Such sparse service coverage and limited accessibility compromises the legitimacy of the profession and the institutions of justice. ABS could open up these unsaturated markets to service providers. New structures can also alleviate these issues by providing access to new sources of capital for firms, which facilitates market entry and start-ups. This eases capital cost and return pressures, which can improve pricing competition. From ABS, what emerges is a business case and accessibility case that are tightly aligned.

Moreover, ABS may signify a progressive culture shift. For incoming lawyers, the primacy of the joint lawyer-manager-owner model is a puzzling anachronism, and, for some, a symbol of law's daunting and steepening hierarchy. The profession's obsession with it toils amid modern demands for improved affordability, billing certainty, and work efficiency. New lawyers can feel that they are expected to bide their time within the four walls of a precariously ascending box on an org chart, and that opportunities to apply themselves to the nuts and bolts of the workplace itself are few and far between. These factors stunt the profession's ability to deliver on its duties to the public, and eliminate an available frontier for renewal. Resistance to ABS starts to look a lot like resistance to better ways of doing things.

Renaissance and reform

While some have asked how much weight the Law Society should give the ideas of students, we question the wisdom of lending excessive credence to a more timid, insular approach. An industry that wants to pat itself on the back for its fabled institutional and public service roles loses the luxury of such caution with each echelon of society that slips from its service coverage. In the face of Ontario’s access to justice stalemate, industry disruption – a wider exposure to Porter’s Five Forces – can be a source of positive change.

Of course, the history of Canadian legal services is one guided by the knowledge, experience, and insight of senior members of the profession. Many great reforms have been pioneered or perfected by the Ontario bar. But seldom have those propositions put the business druthers of lawyers in their crosshairs. For obvious reasons, the ABS debate should never be concerned with defending the creature comforts of lawyers, propping up a singular, consultancy business model, or dragging along any baggage of lawyer exceptionalism. As relative outsiders, students might be well positioned to challenge the conventional wisdom.

For our generation, ABS offers developments that are worth getting excited about. Its potential aligns with our aspirations for law as a calling and for legal practice as a modern enterprise - one that is responsive and accessible to the society it serves. Our views are informed as much in a spirit of legal service renaissance as one of legal industry reform. We are conscious of our novice station in the legal community. It is that same, often troubling vantage point that compels us to share our ideas about the future of law. Too often, that future has been determined by the interests of the past.

Douglas Judson is a JD/MBA student at Osgoode Hall Law School and the Schulich School of Business. He currently serves as President of the Law Students' Society of Ontario. Follow him at @dwjudson.

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Comments
Gene Parmesan 2/7/2015 6:28:09 PM

I wholeheartedly agree with everything Bradley said. ABS is just a way to give big law firms access to more capital.


Bradley Wright 2/4/2015 12:16:56 PM

The only promises that ABS holds out is a badly compromised independence of the legal profession, anti-competitive corporate concentrations, higher prices to the public, lower services to the public, and loss of self-regulation given that the government will rightly be very leery of any notion that lawyers will somehow not be compromised by being beholden to nonlawyer paymasters. The so-called benefits of ABS are all, 100% of them, achievable without ABS. The harms of ABS are already becoming increasingly apparent in the two jurisdictions that were stupid enough to allow it. Supporters of ABS in Ontario are willfully blind to this either because they are misguided true believers or they secretly expect to profit from it. I have yet to find one ABS supporter who thinks ABS will result in a decrease in the supporter's income. They don't mind if any decreases come at the expense of others, but they sure do not think they will be harmed. It is disgraceful to be willing to sell out the independence of the legal profession to multi-billion dollar corporations headquartered elsewhere and who will have their shareholders interests uppermost in mind, not the interests of the Ontario public. There are no protections of our independence that would stand up over time. Even in the UK, the experts, including the lord chief justice, are saying that there have no benefits to the public and that all ABS does is allow giants access to outside capital to become even more gigantic. More hollowing out of the middle class. More harm to the public. More harm to our important place in society. All because some people are blind or greedy. What a shameful situation. It is to be hoped that those of us who are not misguided, not greedy, and who do see clearly the dead obvious harms, and ever increasing harms, of ABS will prevail against what is the worst idea to hit the profession in centuries.



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