The spectre of “non-lawyers” owning equity in law firms has led some practitioners to express grave concerns about the survival of our ethical standards, and about the wisdom of allowing “non-lawyers” to deliver legal services at all. Before we can dive too deeply into these questions, we need to step back and look at the bigger picture.
Generations ago, lawyers were granted the privilege (not the right) of self-regulation. Using the powers assigned to us through that privilege, we developed, published, and strictly enforce (on ourselves) several behavioural codes that we refer to collectively as “legal ethics.” (For clarity, “ethics” here refers to explicit normative standards of conduct, rather than the more colloquial sense of “moral behaviour.”) Among the standards we enforce through ethical codes are:
- Service above all to the courts and the rule of law.
- Complete confidentiality of client information.
- Loyalty to client interests, as expressed through conflicts rules.
- Independence of our counsel from outside influence.
These rules are meant to guarantee to clients and to society generally that we serve the greater good and advance the interests of our clients without partiality. They are part of the quid pro quo of self-governance: we hold ourselves to very high standards so that no one else feels compelled to step in and hold us to theirs. Nobody, in the continuing debate over liberalization of law firm ownership rules, contends that these standards and goals are obsolete or unnecessary. (Indeed, in the multi-player market coming our way, our ethical standards will nicely double as a competitive advantage.)
Lawyers tend to raise two ethical objections to the changes in legal regulation that have occurred in Australia and Great Britain, and that have been proposed in the CBA’s Futures Report. The first is that non-lawyers are not bound by lawyers’ ethical standards, and therefore the risk is too great that their clients’ interests will not be protected and may even be abused. The second is that allowing non-lawyers to own equity in law firms fatally compromises our duty of loyalty to the courts and to our clients because lawyers will be bound by an additional, higher duty to advance the interests of these non-lawyer shareholders. Let’s look at these objections in turn.
1. “Non-lawyer” unfitness
There is, to begin with, a strong case to be made that non-lawyers are fully capable of conducting themselves with the integrity and impartiality we expect from lawyers, not least because exploiting or abusing one’s customers is a terrible way to run a business and a good way to wind up in jail. I have written before about the specious and self-serving nature of the non-lawyer category into which lawyers place everyone in the world except us. But let’s assume, just for argument’s sake, that non-lawyers will pose a genuine risk to their clients’ and customers’ interests.
It is not entirely clear to me why this would be something that should concern the legal profession. Those who hire non-lawyers, in the multi-participant legal market of the near future, are not our clients, and we owe them no professional duties. Nor are we their parents or guardians. They will have made a choice to hire someone who is not a lawyer, and they can reap both the rewards and consequences of that choice. Fundamentally, it’s none of our business.
Lawyers have been granted the privilege of regulating ourselves. Nobody, however, has ever granted us the privilege or assigned us the duty to regulate anyone else. (With two exceptions: independent paralegals in Ontario and limited license legal technicians in Washington State.) In almost all cases, law societies, state bars, and other regulatory bodies are not directed in their founding documents to “protect the public.” They are directed to “govern the legal profession in the public interest.” Those are two different mandates. If someone wants to hire a non-lawyer, and the non-lawyer accepts the engagement, it seems to me that it’s their business, not ours.
2. Corruption of lawyer ethics
This objection, on its face at least, has more merit. It is reasonable to be concerned that the presence of non-lawyers in the ownership structure of law firms could pose a threat to our duties to clients and our independence from outside interests. Even a small risk in this area should be taken seriously because of the enormous importance of lawyer independence to our professional existence and to the rule of law. But simply because this risk is real and serious does not automatically mean that identifying it is enough to end the discussion. If it is a risk, let’s look at whether and how it can be managed.
We should isolate, for this discussion, the operation of in-house or public sector law departments, which very clearly are owned and operated by non-lawyers. We are concerned here with the private bar, providing services to lay clients for whom we assume (though not always correctly) a low level of sophistication. The principles at play in these workplaces are not fully applicable to this conversation, although it is at least helpful to note that the mere presence of non-lawyers in the ownership and financial structure of their clients has not been fatal to the independence of these lawyers. Non-lawyer status is not an airborne disease.
As it happens, we have an example of a large, multinational law firm with non-lawyer equity owners: Slater & Gordon. In the firm’s initial public offering prospectus, among the “risks” disclosed to potential share-buyers was their tertiary position in the firm’s loyalties: the courts first, clients second, shareholders third. Those who buy stock in Slater & Gordon acknowledge and accept that. Unlike other businesses, where “shareholder value” is (perversely, in my opinion) the only objective, investing in a law firm means accepting a much-reduced level of influence and importance.
I am not aware of any ethical difficulties Slater & Gordon has experienced, or any accusations – made by clients or judges – that public ownership of the firm has corrupted its lawyers’ professional duties or harmed its clients’ interests. The emergence or revelation of such problems or accusations could indeed pose a serious challenge to advocates of non-lawyer ownership. But the absence of such problems or accusations, over a period of several years, in two different countries, ought to be a factor in the discussion as well.
It seems to me that, whether a law firm is owned by lawyers, non-lawyers, or martians, the lawyers in the firm still operate under the auspices of lawyer regulation. (Under “entity-based” regulation, which is already in place in Australia and the UK and appears to be coming to Nova Scotia, the firm itself will be bound as well.) If a regulated lawyer breaks a professional standard, for whatever reason, she will be investigated and punished. Whether her cheques are signed by the managing partner lawyer or by a corporate payroll employee, she is still on the hook for what she does and doesn’t do to advance her clients’ interests and serve the rule of law. There will be no exception granted to a law firm owned in whole or in part by non-lawyers. If anything, I expect that ethical scrutiny of such a firm would be several degrees more intense than for lawyer-owned firms.
Now, it might be objected that the influence of a non-lawyer equity owner would be more subtle and pervasive than that. The non-lawyer would not directly order a lawyer to drop a case or reveal a client confidence on the record. Instead, he would influence, by his very presence and through various innocuous but well-timed remarks, that perhaps the firm should pursue a different course or be more open about a client’s position. I have two responses to this objection.
First, if we are now guarding against invisible, inaudible, and theoretical risks to lawyer independence – “this might happen and there would be no way to prove that it didn’t” – then we can concede that the clear and present danger of this risk is not readily apparent. We are now moving out of the zone of probability, which is a fair and legitimate battleground, to one of possibility, which is unanswerable: no one can ever prove that something undetectable will never happen. Secondly, the assumption at the heart of this objection is the same as the one above: that non-lawyers are less trustworthy, less honourable, and more mercenary than lawyers are – and conversely, that lawyers have more integrity, character, and selflessness than non-lawyers do. I don’t find this line of reasoning especially sound or especially attractive.
As I have already noted, I am not dismissing out of hand the risks posed by regulatory overhaul to lawyer independence. The concern is legitimate, and the stakes for the legal profession are high. The case for either side of the debate is not so obvious that further discussion is unnecessary. We should continue to engage on these issues, but let’s engage on probabilities, not possibilities; evidence, not worries; what we know and can reasonably anticipate, not what we fear. The right answer is out there. Let’s go find it.
Jordan Furlong is a lawyer, strategic consultant and analyst who forecasts the impact of the changing legal market on lawyers, law firms and legal organizations. Based in Ottawa, Jordan is a partner with the global consulting firm Edge International.
Contact Jordan at jordan@edge-international.com, by phone at 1.613.729.7171, or visit his blog at www.Law21.ca.