01 Aug 2018

California bar urged to allow non-lawyer ownership of law firms

The State Bar of California to set up task force to study allowing non-lawyers to invest in and own law firms, proposals expected in 2019.


The State Bar of California is being urged to take the lead in the US on non-lawyer ownership. The issue has been long-running, supported by the nationwide American Bar Association (ABA), but it has not achieved sufficient support, but this could now change.

Vexing problems

A task force to investigate the issue is being set up following a report commissioned by the state bar from Professor William Henderson, chair on the legal profession at Indiana University Maurer School of Law. The taskforce proposals are expected in 2019, and could lead to an alternative business structure regime akin to the UK and Australia. Professor Henderson said that ‘to foster innovation, the ideal would be to have lawyers and allied professionals working together as co-equals within the same legal service organization.’ He also noted the appetite from investors to enter the legal market. His ‘Legal Market Landscape Report’ found that private investors were ‘increasingly pushing the boundaries’ of the rules banning non-lawyer ownership by funding new technologies and service delivery models ‘designed to solve many of the legal market’s most vexing problems.’

Costly law

Professor Henderson explained consumers and businesses legal services are evolving very differently, but they are tied together by ‘the problem of lagging legal productivity.’ He explained, ‘as society become wealthier through better and cheaper good and services, human-intensive fields such as law, medical care, and higher education become relatively more expensive. In contrast to medical care and higher education, however, a growing proportion of US consumers are choosing to forgo legal services rather than pay a higher price,’ adding ‘the law should not be regulated to protect the 10% of consumers who can afford legal services while ignoring the 90% who lack the ability to pay.’ He argued this puts the legal profession at an ‘inflection point’ requiring action by regulators. Professor Henderson explained, ‘solving the problem of lagging legal productivity requires lawyers to closely collaborate with allied professionals from other disciplines.’ He concluded, ‘some US jurisdiction needs to go first,’ and based on historical precedent the most likely candidate is California.