Legal Services Act comes to US
UPDATE 4/5/11: The ABA released an issue paper through its Commission on Ethics 20/20 seeking comments on allowing Alternative Business Structures (ABS). As the paper states it is looking at how "core principles of client and public protection [can] be satisfied while simultaneously permitting U.S. lawyers and law firms to participate on a level playing field in a global legal services marketplace that includes the increased use of one or more forms of alternative business structures.” Basically this would allow for active participation of non-lawyers in law firm operations and business models. The smart folks at Legal Futures have a good overview here.
North Carolina State Senator (and lawyer), Fletcher Hartsell, Jr., introduced a bill into the NC General Assembly that seeks to allow non-lawyer ownership of law firms – known as Bill S254. UK’s John Flood asked the question briefly “[h]as the US finally adopted the legal services act?” Those familiar with the LSA know that it is a transformational law within England and Wales that is changing the landscape of the legal profession – to what degree remains unclear. The ABA Journal also reported on this NC bill simply providing the name of the State Senator and the basics of the bill.
While the NC bill is referred to the Judiciary Committee (and I admit I am not a NC parliamentarian so have no idea on the course this will take or time line) it nonetheless represents at least some effort here in the US to change the way in which law firm ownership is controlled – moving from an lawyer only private equity partnership model to non-lawyer owned share-based model.
Who cares and what could this mean? Well it is worth noting that the bill in its current form only allows up to 49% ownership of nonlicensee (non-lawyer) so control of any organization pursuing this model would still rest presumably in the hands of licensees – barred lawyers. While not as significant (yet) as the LSA it nevertheless is a serious effort to alter the way in which firms are structured and operated. While I am not sure what Senator Hartsell’s motives were for this I do hope that they were similar to that of the UK’s Ministry of Justice – as stated on its home page:
The Legal Services Act reforms the way legal services in England and Wales are regulated and puts the consumer interest at the heart of the regulatory framework.
It is worth noting that Senator Hartsell himself is a lawyer and is a named partner for his firm Hartsell & Williams, P.A. – what can be considered a small regional firm. I note this as this is not a Big Law initiative - something that I at least thought any movement on this topic would originate from.