New Ariz. Law Practice Rules May Jump-Start National Reform

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On Jan. 1, 2021, a far-reaching reform of the practice of law took effect in Arizona, opening the sector up to nonlawyer participation. Given the global context of the reform and the general economic climate, we predict that other states will follow suit in coming years, profoundly transforming the American legal profession.

The reform's goal is to increase access to justice. We predict, however, that it will have both positive and negative additional consequences — for clients, the justice system, legal education and lawyers' careers — and we explore some of those consequences below.

The reform consists of two main prongs.

The first is the elimination of Arizona's prohibition on nonlawyers sharing in lawyers' fees, holding an economic interest in a law firm, and participating in the management of law firms. In their stead, the Arizona Supreme Court put in place a robust regulatory framework for such nonlawyer participation, which can take place only through a new type of entity, an alternative business structure, or ABS.

The second is the creation of a new licensed profession, called a legal paraprofessional, to provide limited legal services to the public, including representation in certain court proceedings.

Over the past century, the legal profession has repeatedly considered and rejected such reforms. While no one denied that the reforms can provide lawyers with access to potentially unlimited pools of capital and introduce efficiencies that, if passed onto the clients, will increase access to justice, the reforms were also understood as a potential threat to the very foundation of the practice of law.

By accepting active or passive investment, lawyers will be presented with a structural conflict between, on the one hand, their ethical obligations to their clients and to the courts and, on the other hand, their obligations to their investors.

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