Mind the Gap:
New Initiatives to Close the California Justice Gap
By Thomas Greene
Most of us don’t spend a lot of time monitoring the day-to-day activities of the State Bar of California. We pay our dues and quickly return to busy public and private practices. But ongoing efforts by the State Bar to close the California justice gap may change who, what and how legal services are provided in the future. These developments are worth your attention.
II. TWO KEY WORKING GROUPS
Two key working groups formed by the State Bar are working to assess and address ways to improve legal services to unserved and underserved Californians. The first is the California Paraprofessional Program Working Group. This group of lawyers, judges, and non-lawyers is charged with developing recommendations for consideration by the State Bar Board of Trustees for the creation of a paraprofessional licensure/certification program to increase access to legal services in California. In September, this group released a 104-page report with almost 1300 pages of appendices recommending licensure and certification of paraprofessionals in multiple legal practice areas.1 Their report is now available for public review and comment. This comment period ends on January 12, 2022. The second is the Closing the Justice Gap Working Group which is charged with addressing five policy areas, including the extent to which a controlled experiment within a regulatory “sandbox” can help the State Bar and the Legislature assess whether alternate business structures not currently allowed by ethics rules or the Business and Professions Code should be considered for wider adoption. This working group also includes lawyers, judges and non-lawyers but was formed later so is expected to submit its recommendations no later than September 2022.2
III. THE JUSTICE GAP
The justice gap has two dimensions. The first is a service gap, that is, inadequate supply of legal services at affordable prices. The second is a knowledge gap that reflects a lack of demand for legal services because consumers are unsure that the problem they are experiencing is a legal one. Of the two, a significant portion of the justice gap in California is a consequence of the knowledge gap.3 Assessing the precise scope of the supply gap and the knowledge gap is still a work in progress. However, there are a few landmarks. First, families at or below 125% of the federal poverty level experience potentially serious legal problems 4.2 times per year, while families above this level experience 2.1 such problems in a year.4 Second, surveys indicate that most civil legal problems arise in specific areas of the law, notably children and custody, veterans, income maintenance, homeownership, employment issues, and rental housing.5 Of these areas, consumers seek, in order, help for children and custody issues, homeownership, immigration, veterans, disability, and rental housing.6 Another resource on need can be found in data from California court’s self-help initiative. These data show that 62% of requests involve family law matters while 21.4% involve civil matters and 4.2% relate to probate.7 National data indicate that “two-thirds (64%) [of all civil cases] were contract cases, and more than half of those were debt collection (37%) and landlord/tenant cases (29%). An additional sixteen percent (16%) were small claims cases involving disputes valued at $12,000 or less.”8 Third, those who surmounted the knowledge gap and sought help were generally satisfied with the help they received. Low-income Californians reported that 72% of low-income Californians that received legal help offline to resolve a legal problem “have gotten, or respondents expect to get, the legal help necessary to resolve it.”9
IV. OTHER JURISDICTIONS
A number of other jurisdictions have or are considering changes in legal regulation. The most salient is the United Kingdom, which significantly deregulated legal services in 2007. In Arizona, that state’s supreme court has authorized alternate business structures, including non-lawyer equity interests in law firms, while Utah is operating a legal sandbox that allows non-traditional legal service providers to show their capacities in a controlled environment. United Kingdom and Wales: The United Kingdom’s Legal Services Act of 200710 significantly changed the traditional legal regulation of lawyers and law firms in England and Wales. The most important reform was authorization of so-called alternate business structures (“ABSs”) under which non-lawyers can take an equity interest in a law firm. Currently, six such law firms are listed on the London Stock Exchange.11 All the Big Four accounting firms have ABS licenses for internal law firms serving their accounting and consulting clients.12 Within such firms, a lawyer-manager is held responsible for insuring that lawyers within these structures follow all ethics rules applicable to lawyers.13 There are approximately 1,000 ABS firms in the U.K. and Wales. The “vast majority of these law firm-to-ABS moves have been by very small firms whose clients are individuals rather than businesses.”14 A former U.K. legal regulator has suggested that these shifts may reflect inclusion of a spouse as a co-owner, which reduces U.K. taxes for the solicitor and his or her spouse.15 Lawyers in the U.K. appear to be largely satisfied with these changes. Over time, “[t]here has been a shift away from the partnership model to incorporatisation.”16 The ability to share fees has significantly increased third-party litigation funding for major cases and class actions.17 And a webinar by a former senior executive at the Solicitors Regulation Authority argues that the new rules create a potential “gold rush” for lawyers and non-lawyers.18 In terms of innovation, technology firms are active in the U.K. market but the primary technologies being deployed generate "standardized documents for wills or small business incorporations.”19 The U.K.’s Legal Services Board concluded that: “Despite a wave of market liberalization and deregulation, levels of innovation overall have remained unchanged.”20 In terms of improving access to legal services for the less privileged, a Harvard fellow reported that: “perhaps, counter-intuitively, there is little evidence to indicate that [ABSs] substantially improved access to civil legal services for poor to moderate income populations.”21 A 2020 U.K. report concluded that, like California, “unmet need was estimated to be highest in three groupings: employment, finance, welfare and benefits; property, construction and planning; and family. Unmet legal need was estimated to be lowest for injury and consumer problems,22 where contingent fee arrangements are common. But a “high level of unmet legal need among individual consumers and small businesses…is evidence of substantial latent demand.”23 Finally, the Competition and Markets Authority (CMA), the U.K.’s competition agency, reports that “a lack of information weakens the ability of consumers to drive competition through making informed purchasing decisions.”24 In response, the U.K. government stepped up requirements for transparency in the legal market.25 Price transparency is far easier than transparency with respect to relative quality of services provided by different firms. However, price transparency has helped solicitors because consumers have inaccurately assumed solicitors were significantly more expensive than their non-lawyer competitors.26 Arizona: On November 4, 2020, the Arizona Supreme Court amended Arizona rules to authorize alternate business structures, including law firms owned by non-lawyers, to operate in Arizona.27 The goal of this effort is to facilitate new and innovative legal services by lifting many traditional ethics rules, particularly Rule 5.4 limiting ownership of law firms to lawyers. Although focused on innovation, the Arizona Supreme Court requires appointment of a Compliance Attorney, who must assure that the firm follows Arizona ethics rules.28 Utah: The Utah Supreme Court has created an Office of Legal Services Innovation that oversees a regulatory “sandbox” that “permits entities to offer new and innovative ideas, methods, and models of legal practice.” This “limited and controlled space outside of the traditional rules governing legal practice” allows the “the Court to assess, recommend, and monitor entities seeking to try new approaches to legal practice.”29 This entity began life in August 2020 with the issuance of Order No. 15 that created the Office of Legal Services Innovation and the Utah sandbox. To date, Utah has authorized various ventures, including ABS practices and technology initiatives.30 Washington: In 2012, Washington pioneered creation of a class of super-paralegals who could provide some legal services without lawyer supervision. This Limited License Legal Technicians (or LLLT) program was hailed at the time as “creating a new, and likely lower-cost, option for consumers by allowing appropriately trained and regulated professionals to engage in some kinds of law practice without a law degree.”31 After several years and the expenditure of $1.4 million, this program ended in 2020, although admitted licensees were allowed to continue to practice.32
V. PARAPROFESSIONAL PROGRAM WORKING GROUP
This is a supply-side initiative of the State Bar, the premise of which is that licensed and trained paraprofessionals are needed to close the justice gap. This working group recommended licensure of such paraprofessionals in five practice areas: collateral criminal proceedings; consumer debt/general civil; employment /income maintenance; family, children and custody; and housing. Within each practice area where these paraprofessionals may practice, the Working Group identified specific tasks they can or cannot do. Four practice areas were considered but excluded: estates and trusts; health; immigration; and veterans.33 On a split vote, the Working Group recommended a default position that licensed paraprofessionals be allowed to carry our “full in-court representation, with a complete prohibition on jury trials” but also providing that the default position could be modified in regard to a particular practice area.34 To qualify, paraprofessionals must have a J.D. or L.L.M. from an ABA or California accredited or registered law school; be qualified paralegals pursuant to Bus. & Prof. Code § 6450(c); or be qualified as legal document assistants pursuant to Bus. & Prof. Code § 6402.1(b). All practice areas require training in ethics, pretrial discovery and evidence, and court procedures. Additional specialized training is required for each practice area. In addition, there are experiential requirements amounting to 1,000 hours over at least six months, 500 hours of which must be in the student’s practice area. Supervising attorneys are required to be licensed for four years or more and are limited to supervising no more than five applicants at any one time.35 An entry examination is required which includes subject matter-specific testing plus testing on professional responsibility requirements. Applicants will also be subject to background checks and moral character requirements.36 Financial responsibility requirements include participation in a client security fund, malpractice insurance, a surety bond, and a restitution fund.37 Licensed paraprofessionals will be subject to a discipline system that is a hybrid of the current regulatory structure applicable to paralegals and document technicians and the structure used by the California Department of Consumer Affairs for its licensees, including physicians.38 Licensed paraprofessionals will be authorized to own a non-majority share of the firms within which they work.39 The report recommends a phased rollout by practice area and county. Early practice areas for rollout are family, children, and custody; housing; and collateral criminal. Early northern counties include Alameda, El Dorado, Placer, Sacramento, Santa Clara and Yuba. Central and Southern California counties are Fresno, Merced, Tulare and Orange.40 These recommendations will require amendments to multiple California statutes and ethics rules, including those applicable to the unlawful practice of law.41 Comments to the State Bar on these proposals are due by January 12, 2022.
VI. CLOSING THE JUSTICE GAP WORKING GROUP
This working group was recommended by the State Bar’s Access Through Innovation of Legal Services task force. The Justice Gap Working Group is another supply-side initiative that has been asked to recommend a possible legal sandbox within which non-traditional legal services providers will be allowed to demonstrate what they can do in a controlled environment. This working group is expected to develop criteria for ABS firms, including technology firms. So far, this working group has developed preliminary admission criteria and principles for regulation of sandbox entities. The working group is also evaluating 1) California’s lawyer advertising and solicitation rules to determine whether and to what extent these rules inhibit or advance innovation and access to legal services; 2) existing lawyer referral service statutes and rules to determine whether and to what extent these statutes and rules inhibit innovation and access to legal services; 3) potential amendments to rule 5.4 of the California Rules of Professional Conduct regarding attorney fee sharing with nonlawyers, specifically addressing the question of whether amendments to this rule are warranted; and 4) potential amendments to the California Rules of Professional Conduct regarding the delivery of nonlegal services by lawyers and businesses owned or affiliated with lawyers. This group meets monthly, and its agendas and working documents are publicly available. The current plan is to provide a report to the California Bar on or before September 2022.43
VII. NEXT STEPS
The work of both working groups will be reviewed initially by the State Bar’s Board of Trustees. In the case of the recommendations of the Paraprofessional Program Working Group, comments are due by January 12, 2022. If the same 110-day comment period is extended to the Justice Gap Working Group, comments will be due in late December 2022 or early January 2023.
Unlike Arizona and Utah, key elements of legal practice in California are regulated by statutes. This means that legislative action will be required to implement any major reforms. This will include hearings and votes in both the Assembly and Senate, followed by review by the Governor.
Thomas Greene is a trial attorney for the Antitrust Division of the U.S. Department of Justice. He is the former chair of CLA’s Litigation Section and a member of the Closing the Justice Gap Working Group. The views expressed here are those of the author and do not necessarily reflect the views of the Antitrust Division or the Department of Justice.
1 State Bar of California, Final Report and Recommendation of the Paraprofessional Program Working Group (Sept. 23, 2021), Group, https://board.calbar.ca.gov/docs/agendaItem/Public/agendaitem1000028069.pdf.
2 State Bar of California, Closing the Justice Gap Working Group: Fact Sheet, https://www.calbar.ca.gov/Portals/0/documents/factSheets/Closing-the-Justice-Gap-Working-Group-Fact-Sheet.pdf.
3 State Bar of California, 2019 California Justice Gap Study: Executive Report 9 (2019), https://www.calbar.ca.gov/Portals/0/documents/accessJustice/Justice-Gap-Study-Executive-Summary.pdf.
4 State Bar of California, California Justice Gap Survey Technical Report 9, https://www.calbar.ca.gov/Portals/0/documents/accessJustice/California-Justice-Gap-Survey-Technical-Report.pdf.
5 Id. at 11 (Figure 3)
6 Id. at 11 (Figure 8)
7 Judicial Council of California, Impact of Self Help Center Expansion in California Courts 35 (Figure 10) (January 2021), https://www.courts.ca.gov/documents/lr-2021-self-help-centers-funding-analysis-BA-2018-gov-code-9795.pdf.
8 National Center for State Courts, The Landscape of Civil Litigation in State Courts (2015), p. iii, www.ncsc.org/__data/assets/pdf_file/0020/13376/civiljusticereport-2015.pdf.
9 State Bar of California, California Justice Survey Technical Report 16 (2019), https://www.calbar.ca.gov/Portals/0/documents/accessJustice/California-Justice-Gap-Survey-Technical-Report.pdf.
10 Legal Services Act 2007, c. 29, §§ 71–111 (U.K.), http://www.legislation.gov.uk/ukpga/2007/29/pdfs/ukpga_20070029_en.pdf.
11 Legal Services Board (U.K.), The State of Legal Services 2020 ¶ 377, https://legalservicesboard.org.uk/wp-content/uploads/2020/11/The-State-of-Legal-Services-Narrative-Volume_Final.pdf.
12 Id. at ¶¶10, 373-374.
13 Solicitors Regulation Auth., SRA Practice Framework Rules r. 14 (12th ed., 2014), http://www.sra.org.uk/solicitors/handbook/practising/content.page; Practice Notes: Alternative Business Structures, L. SOC’Y, § 5.1 (July 22, 2013), http://www.lawsociety.org.uk/support-services/advice/practice-notes/alternative-business-structures.
14 John Armour and Mari Sako, Lawtech: Levelling the Playing Field in Legal Services 19 (5 February 2021), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3831481.
15 Alison Hook, Why the Boston Consulting Group is wrong about the effects of deregulating legal services in England and Wales 2 (7 April 2021), https://www.linkedin.com/pulse/why-boston-consulting-group-wrong-effects-legal-services-alison-hook/?trackingId=yN0u6BWpSVuCTJ3xwBwgjg%3D%3D.
16 Legal Services Board (U.K.), The State of Legal Services 2020 20 & ¶¶ 368-69. https://legalservicesboard.org.uk/wp-content/uploads/2020/11/The-State-of-Legal-Services-Narrative-Volume_Final.pdf.
17 Id. at ¶ 379.
18 Crispin Passmore, The Legal Goldrush (2018), https://www.youtube.com/watch?v=zyIhvR26H4g.
19 John Armour and Mari Sako, Lawtech: Levelling the Playing Field in Legal Services 13 (5 February 2021), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3831481.
20 Legal Services Board (U.K.), The State of Legal Services 2020 42, https://legalservicesboard.org.uk/wp-content/uploads/2020/11/The-State-of-Legal-Services-Narrative-Volume_Final.pdf.
21 Nick Robinson, When Lawyers Don’t Get All the Profits: Non-Lawyer Ownership of Legal Services, Access and Professionalism, 29 Geo. J. of Legal Ethics 1, 44 (2016)
22 Legal Services Board (U.K.), The State of Legal Services 2020 ¶ 27, https://legalservicesboard.org.uk/wp-content/uploads/2020/11/The-State-of-Legal-Services-Narrative-Volume_Final.pdf.
23 Id. at ¶382.
24 Id. at ¶ 75, see also Competition and Markets Authority, Legal Services: Qualitative Research Report ¶¶ 102 et seq. (July 2016) (difficult and time consuming for small and medium size businesses to compare cost and quality of legal services and providers), https://assets.publishing.service.gov.uk/media/577f634eed915d3cfd000123/Research-Works-Legal-Services-Report.pdf.
25 Solicitors Regulation Authority, Checks reveal law firms need to do more to comply with transparency rules (6 June 2019). Press release available at: https://www.sra.org.uk/sra/news/press/2019-press-release-archive/transparency-checks-june-2019/.
26 Solicitor Regulation Authority, Better Information in the Legal Services Market: Year One Evaluation of the Transparency Rules (15 Oct. 2020), https://www.sra.org.uk/sra/how-we-work/reports/better-information-legal-services-market/.
27 Arizona Supreme Court, Admin. Order No. 2020-173 Re: Arizona Code of Judicial Administration § 7-209: Alternate Business Structures (Nov. 4, 2020), https://www.azcourts.gov/Licensing-Regulation/Alternative-Business-Structure.
28 Id. at § 7-209G (duties of compliance attorney), see also Frequently Asked Questions About ABSs, https://www.azcourts.gov/accesstolegalservices/Questions-and-Answers/abs.
29 Utah Office of Legal Services Innovation, Frequently Asked Questions, https://utahinnovationoffice.org/frequently-asked-questions/.
30 Utah Office of Legal Services Innovation, News You Can Use: Who is in the Utah Sandbox and What are They Doing? (Jun. 15, 2021), https://utahinnovationoffice.org/2021/05/25/news-you-can-use-who-in-sandbox/.
31 Andrew M. Perlman, Towards the Law of Legal Services, 37 Cardozo L. R. 49, 54 (2015), http://cardozolawreview.com/wp-content/uploads/2018/08/PERLMAN.37.1.pdf.
32 Lyle Moran, How the Washington Supreme Court’s LLLT program met its demise, ABA Journal (Jul. 9, 2020), https://www.abajournal.com/web/article/how-washingtons-limited-license-legal-technician-program-met-its-demise.
33 State Bar of California, Final Report and Recommendation of the Paraprofessional Program Working Group 10-12 (Sept. 23, 2021), https://board.calbar.ca.gov/docs/agendaItem/Public/agendaitem1000028069.pdf.
34 Id. at 43.
35 Id. at 47-50.
36 Id. at 50.
37 Id. at 52-54.
38 Id. at 64 et seq.
39 Id. at 59-60.
40 Id. at 18-19
41 Id. at 60-61.
42 State Bar of California, Task Force on Access Through Innovation of Legal Services, Final Report and Recommendations 31-42 (Mar. 6, 2020), https://www.calbar.ca.gov/Portals/0/documents/publicComment/ATILS-Final-Report.pdf. State Bar of California, Task Force on Access Through Innovation of Legal Services, at 31-42.
43 State Bar of California, Closing the Justice Gap Working Group, https://www.calbar.ca.gov/About-Us/Who-We-Are/Committees/Closing-the-Justice-Gap-Working-Group.