Arizona Legal Industry Reform

What Legal Industry Reforms Have Been Implemented in Arizona?

Arizona’s Supreme Court unanimously approved reform measures in August 2020; they were put into practice in January 2021. Different from past attempts to decrease Arizona’s access to justice gap (namely, relying on attorney volunteering and pro bono work), the current reforms change the very nature of how legal services are delivered and who can deliver them.

In contrast to the reforms seen in Utah, Arizona bypassed a test period and went straight for major, permanent reform.

The regulatory changes implemented in Arizona allow the following practices:

• Nonlawyer ownership of law firms. This follows the elimination of ethics rule 5.4, which barred nonlawyers from owning or having an economic interest in law firms.
• Business affiliations and fee sharing between lawyers and nonlawyers.
• Technology-based legal service providers.

Those providing legal services via these reforms operate as Alternative Business Structures. Arizona has also implemented the Legal Paraprofessional Program. This allows nonlawyer professionals who meet certain criteria to offer limited legal services.

By allowing for new models of law firm ownership and new types of legal service providers, Arizona has turned its legal industry upside down. And its example isn’t being ignored. Other states are looking to Arizona as they research their own reform options, and we’ll likely see more states follow in Arizona’s footsteps.

How Do Alternative Business Structures in Arizona Work?

Alternative Business Structure entities in Arizona operate similarly to businesses in other regulated industries. They must receive licensure, and are monitored for quality and compliance.

Before utilizing Arizona’s Alternative Business Structure model, interested parties must submit applications to the Committee on Alternative Business Structures. The Committee then advises the Supreme Court to approve or deny the applicant.

For those pursuing nonlawyer law firm ownership, a “compliance lawyer” needs to be designated as well. This person, who must be a licensed Arizona lawyer, is responsible for making sure the firm meets all ethical standards and requirements of the legal profession.

Why Are Legal Industry Reforms in Arizona Necessary?

Legal industry reforms in Arizona are necessary because the state’s ability to meet the legal needs of its residents has decreased over time. The now-abandoned ethics rule 5.4 (which barred nonlawyer law firm ownership) was originally put in place to aid the economic viability of law firms—it was never intended to aid the consumer—and this contributed to rising legal service costs.

Increasingly, the rule’s restrictions negatively impact attorneys, too. According to a report by Arizona’s Task Force on the Delivery of Legal Services, Arizona lawyers (especially those at small firms) have struggled to provide adequate services at reasonable prices while also being able to pay their overhead costs. Their inability to partner with nonlawyers only made this problem worse.

As the report says, “The legal profession cannot continue to pretend that lawyers operate in a vacuum, surrounded and aided only by other lawyers, or that lawyers practice law in a hierarchy in which only lawyers should be owners. Nonlawyers are instrumental in helping lawyers deliver legal services, and they bring valuable skills to the table.”

How Does Law on Call Fit in to Arizona Legal Reform?

Law on Call’s application to operate as an Alternative Business Structure in Arizona was recently approved! We’re thrilled (to say the least) and hope to begin providing our low-cost and accessible legal services in the Grand Canyon State soon.

Is Arizona the Only State Pursuing Legal Industry Reform?

No! At least a dozen states are considering legal industry reform and researching the access to justice gap. Legal reform in Utah takes the form of the legal regulatory Sandbox, and Law on Call has been in operation there since Winter 2021.