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Alternative Business Structures Proposals or Solving the Unaffordable Legal Services Problem

Alternative business structures proposals (ABS proposals), the basis of which is to allow commercial investors to own law firms, have no capacity to solve the problem of unaffordable legal services (“the problem”). Their other two major features are to automate routine legal services, and to enable related non-legal services to be provided with legal services. But the cause of the problem is the high cost of legal advice services. They cannot be automated (pdf). Therefore there is nothing in the analytical literature that states that they can solve the problem. But the published arguments used to promote ABS proposals imply that they can. They are not designed to solve the problem. ABS’s are intended to provide an opportunity for investment organizations to buy-up strings of law firms, enfranchise them, for the purpose of obtaining control of the legal services market.

The ABS Approval Program Scenario

There is thus a lot of money to be made not only by the investors, but also by the law firms who will represent them. Therefore there is a powerful reason for law society benchers from the big law firms to work hard to secure their law societies’ advocacy for the necessary changes to legislation that presently prevents non-lawyers from owning law firms. But generally, the smaller law firms are not supportive of the ABS proposals.

As a result, the ABS issue makes necessary, vigilance as to law society benchers serving such self-interest but not their duty to make legal services adequately available to the public. The problem is ignored, but in stark contrast, ABS proposals are fast-tracked for very active consideration by the members of the law society. The bigger law firms will be the ones representing the investors, and enable senior partners to become investors themselves by later moving to become heads of, or senior executives of firms controlled by the investors (e.g., see: Christopher Moore’s The Law Society of Upper Canada and Ontario’s Lawyers 1797-1997 (University of Toronto Press, 1997), at p. 312) . Those “big firm benchers” thus not only act as “rainmakers” for their firms, but also as lobbyists to obtain the necessary changes to legislation to make ABS’s legal.

There is legislation that controls such “gift-giving” in regard to political elections and elected politicians leaving office, but no comparable legislation that specifically deals with benchers and their law firm partners accepting such “gifts” from clients for using the position of bencher to have the law society request changes in legislation as desired by clients. However such acts should be disciplinary offences, and may constitute the criminal offence of “breach of trust by a public officer”—Criminal Code s. 122; the constituent elements of the offence are defined in, R. v. Boulanger, 2006 SCC 32, [2006] 2 S.C.R. 49, 210 C.C.C.(3d) 1. But although law societies can discipline lawyers, they cannot discipline investors. Therefore the effectiveness of law society disciplinary offences will be very much compromised.

Such benchers will have law society ABS committees formed and they will become the chairs of those committees. They will write any texts used for the purpose of obtaining feedback from the membership of the law society. They will write articles in lawyer-read and observed media, in support of the ABS proposals, and they may set undisclosed agendas and timetables for obtaining law society approval of ABS proposals. Once obtained, the law society can be used to petition the government for the necessary changes in the legislation that currently prohibits law firms being owned by non-lawyers.

Entertaining ABS proposals while ignoring the problem cannot be justified, given the fact that ABS proposals do not have the capacity to solve the problem. If law societies can’t or won’t work to solve the problem, they have no purpose and should therefore be replaced by a different management structure that will strive by all means to make legal services adequately affordable.

To solve the problem a different management structure is needed for, or in place of law societies

Because Canada’s law societies have not attempted to solve the unaffordable legal services problem, the following are the consequences:

– there is no published law society text that accurately describes the problem as do those who have analyzed the problem in depth: “the majority of the population cannot obtain legal services at reasonable cost” (see footnote 3 and accompanying text of, “What a Law Society Should Be”);

– there is no published statement that declares the problem to be a law society problem, and therefore that it is the law society’s duty in law to solve the problem;

– the lives of many thousands of people have been severely damaged for lack of legal services;

– as judges have warned, their courts are grinding to a halt due to the high percentages of self-represented litigants;

– because of the volume and complexity of law, the population has never needed legal services more; therefore, if legal services were affordable, lawyers would have more than abundant work and clients;

– the legal profession is shrinking when it should be expanding;

– Canadian legal industry analyst, Jordan Furlong, writing in the ABA Journal, states, as do other analysts, that, “lawyer jobs are disappearing,” and, “we’re seeing the probably irreversible decline of the traditional ‘lawyer job,’”; and, therefore the young lawyer has to be the “agile lawyer” who has to live by a, “flexible availability and multiple short-term engagements.” [Does this mean, hand-to-mouth, poorly paid, part-time piece-work that never allows such a lawyer to develop a specialized practice, nor to obtain sufficient work in smaller areas of population?]

– if legal services were affordable, the legal profession would be urging law schools to increase their enrolments instead of wanting them to contract enrolments;

– improving the funding of legal aid organizations, which provide free legal services, is made increasingly politically unwise because the majority of taxpayers cannot obtain affordable legal services for themselves; but that doesn’t stop law societies from urging governments to provide better funding for legal aid (see also the Law Society of Upper Canada’s press release of February 5, 2007: “Law Society Voices Support for Sustainable Legal Aid”);

– the problem is therefore causing severe and worsening damage to: (1) the population; (2) the courts; (3) the legal profession; and, (4) legal aid organizations;

– law societies are proactive in regard to the competence and ethical practices of lawyers, but ignore the affordability of legal services, and surely the “affordability problem” causes more damage in one day than all of the incompetent and unethical lawyers have caused in the whole of Canada’s history;

– lawyers and judges earn a good living from the justice system, which system taxpayers pay for but cannot obtain affordable legal services for themselves;

– because the majority of the population cannot obtain legal services at reasonable cost, Canada is a seriously legally crippled society; the law is now too voluminous and complex for people to make effective use of laws without the help of a lawyer;

– therefore Canada’s constitutional democracy is equally crippled because the majority of population cannot make effective use of constitutional rights and freedoms and the rule of law, i.e., the Canadian Charter of Rights and Freedoms is but a “paper tiger” to that majority;

– because their help is essential to effective use of the law, lawyers used to be called “the gatekeepers of the constitution,” now, law society failure to attempt to solve the problem has made lawyers “the obstructers of the constitution”;

– therefore, Canada’s judicial system should no longer be referred to as, “the envy of the world” (pdf), and, “Canada’s justice system is looked to as exemplary” (these are hyperlinked references to statements made in 2007 by justices of the Supreme Court of Canada);

– a Federation of Law Societies of Canada publication in 2012 (click on the word “inventory” at the bottom of this webpage) describes the problem as being mere, “gaps in access to legal services” (at p. 30); this FLSC text defines the problem so as to justify law society programs that are alternatives to legal services provided by lawyers-see my analysis of this text: “Access to Justice: A Critique of the Federation of Law Societies of Canada’s Inventory of Access to Legal Services Initiatives of the Law Societies of Canada”;

– the situation appears to be one in which, so as not to have to deal with the problem directly, law societies are allowing the following types of programs to become the permanent answer to the problem: (1) self-help; (2) cutting costs by cutting the competence of the people who provide legal services such as students and paralegals instead of lawyers; (3) programs for increased use of pro bono services; (4) programs to help self-represented litigants be more effective self-represented litigants; (5) programs for simplifying court processes for self-represented litigants; and, (6) programs for “targeted legal services,” i.e., limited retainer services such that the client does more and the lawyer does less. Cumulatively, these programs are not capable of solving the problem, i.e., a bicycle cannot be made to perform like a motor vehicle, no matter how much it is improved;

– the Chief Justice of Canada, The Right Honourable Beverley McLachlin, has at least since 2007, with highly commendable courage, made several speeches to prominent groups whose theme is that, “mainly for financial reasons, Canadians cannot access the Canadian justice system”– those speeches have had no effect upon law society performance in regard to the problem;

– because the Law Society of Upper Canada (LSUC; Ontario) has produced no program whose purpose is to make legal advice services provided by lawyers affordable, I would argue that it has failed to perform its duties under s. 4.2 of the Law Society Act, to advance the cause of justice and the rule of law, and to facilitate access to justice and to protect the public interest; were such duties performed, the problem would not exist;

– lay benchers are appointed to, “represent the public interest,” which is a function they cannot possibly perform now in the 21st century, as they might have in the 19th century;

– the legal profession still produces legal services by the “handcraftsman’s method,” in that it does not rely on specialized support services, even though all other fields of the competitive production of goods and services, including the medical profession, have long abandoned the handcraftsman’s method by moving to a support services method of production because it provides much greater cost-efficiency by means of: (1) a much higher degree of specialization of staff, materials, equipment, and methods of production; and, (2) greater maximization of the “economies of scale” by scaled-up volumes of production; as a result, the problem is inevitable;

– law society benchers know nothing of such factors of production because they have not tried to solve the problem; as a result, their public statements show that they do not understand the problem (pp. 54-58 of this article), because they have not attempted to learn its cause; the theme is to “blame the victim” of the problem, including the government because it has created too much legislation; such statements are simplistic, unjustified, and undeservedly insulting.

– all that has been written about the problem has two self-defeating mistakes: (1) it is written by lawyers who have had no experience solving the problem; and, (2) it assumes that the present method of delivering legal services is the only possible method of delivering legal services, and therefore such publications end with recommendations as to improving that method, whereas the cause of the problem is the method itself; (by creating LAO LAW, the centralized legal research support service at Legal Aid Ontario, I solved a smaller version of the very same problem);

– LSUC’s webpage, Your Legal Bill – Too High?, tells the public: (1) “The Law Society does not set fees for legal services and cannot reduce a lawyer’s or paralegal’s bill that you think is too high”; and, (2) “If you have a complaint about your lawyer or paralegal that does not involve the amount of the bill, see the Law Society’s page on Complaining about a lawyer or paralegal.” In between these statements is a list of things the client can do for itself, none of which offers help from the Law Society. And nowhere does it list any proactive steps the Law Society is taking to make legal services affordable. In effect, this webpage tells the public that the problem is not the Law Society’s problem;

CanLII could be improved to become a true support service, by providing, at cost, the complete legal opinion service that LAO LAW provides, because it is capable of having a substantial impact upon the problem; by way of a detailed, in-depth paper, I have explained that solution to CanLII and to LSUC but they have ignored it; also, such innovation would lead to other innovations (p. 19), which cumulatively, would solve the problem;

– law society management is 19th century management, which is management by part-time amateurs – amateurs because they don’t have the expertise necessary to solve the problem, nor have they tried to obtain it; its traditional management mentality appears to be dictated by the view that being a bencher is an embellishment to one’s career that does not risk enduring the consequences of failed innovations no matter how necessary innovation is needed in order to solve serious and difficult problems such as the problem of unaffordable legal services; therefore needed innovation does not happen until the fear of the consequences of not changing is greater than the fear of the consequences of changing, i.e., the consequences of a failed innovation; law societies being too well insulated against effective criticism, that necessary level of fear never happens, therefore necessary innovation never happens; were it otherwise, the problem would not exist;

– LSUC was removed as the manager of Legal Aid Ontario (LAO) because of its conflict of interest with its representative function for Ontario lawyers, and its failure to innovate so that LAO could cope with a changing reality—see the McCamus Report of 1997, and the 1997 study conducted by Professors Zemans and Monahan for the York University Centre for Public Law and Public Policy, entitled, From Crisis to Reform: A New Legal Aid Plan for Ontario. The result of the McCamus Report was the Legal Aid Services Act, 1998, which incorporated LAO, without LSUC as the manager; that same refusal to innovate is the cause of the present unaffordable legal services problem; The Trebilcock Report of the Legal Aid Review 2008 (p. 13) adopted the recommendations of the McCamus Report.

– law societies regulate the delivery of the second or third most important professional service, legal services (after medical and educational services), by way of a long outmoded method of management; were the situation otherwise, the problem would not exist;

– if the problem is to be solved, a different management structure is needed, such as that recommended by the Clementi Report, 2004, in the U.K., Review of the Regulatory Framework for Legal Services in England and Wales, i.e., separating law societies’ regulatory functions from their representative functions in representing the interests of lawyers; the conflict between those two functions, plus a refusal to risk the consequences of a failed innovation, has lead to ABS proposals being “fast-tracked” while the unaffordable legal services problem, which afflicts the majority of Canada’s population, is ignored.

The ABS approval strategy is aimed at vulnerable and desperate law firms

The ABS proposals have been put forward at a very strategically shrewd time in that many law firms are very short of clients and therefore will have very poor bargaining power when dealing with investors who want to enfranchise strings of owned law firms. Such investors will appear to be the only solution to the economic difficulties of many law firms—pp. 9 and 13 of LSUC’s published ABS Discussion Paper; and to set a scene of urgency, it cites statistics (p. 11) as to the lack of legal services, even though they refer to problems that the ABS proposals cannot solve.

In fact, anything that such ABS proposals can do, the legal profession can do for itself (p. 32ff.), and do it without endangering its professionalism, its fiduciary duty to clients, its reputation, and its community-mindedness. The profession of law is not a business, and business is not the only agency that can render the practice of law as cost-efficient and affordable as necessary. If it “goes for the money” offered by ABS proposals, the legal profession can no longer be trusted to be an important support to judicial independence and therefore of the separation of powers doctrine, which is essential to Canada’s constitution and democracy. ABS’s are not needed nor desirable (p. 32).

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[In addition to the above hyperlinked entries, other relevant papers can be found on: (1) my SSRN author’s page; (2) my Slaw author’s page, at: http://www.slaw.ca/author/chasse/; and, (3) on the Access to Justice in Canada blog (search: “Chasse”)]

Note (1) LSUC has posted a list of the submissions (providing pdf downloads) received in response to its ABS Discussion Paper, including my response (67 pages; click on, “Chasse, Ken”).

(2) The “Alternative Business Structures Working Group Report” is at Tab 8.2 of the Report to Convocation, (pdf) February 26, 2015, of LSUC’s Professional Regulation Committee. It provides a summary of the contents of the responses to LSUC’s ABS Discussion Paper.

Comments

  1. Mr. Chasse, To the extent you are against the wholly unnecessary, permanent weakening of our independence to the detriment of every element of the public interest, otherwise known as ABS, you are bang on. ABS does precisely nothing about the real access to justice issues; in fact, all it does is worsen access in areas that have no access problem. That is the experience unfolding in the UK. The Lord Chief Justice is concerned enough about it that he has called for an investigation into why the trumpeted benefits to the public of ABS are not materializing (and, I say, never will except for temporary predatory price schemes that last only as long as needed to kill the competition from small, independent law firms, after which the prices, of course, zoom way up). What is happening in the UK is an unprecedented orgy of consolidations of ownership in the hands of large and growing entities to the detriment of everybody else, all fueled by the moneyballic steroids of nonlawyer investors who want only one thing – a healthy return to themselves to be paid for by the public and, at some point, by cutting the number and salaries of their lawyers.

    Unfortunately, Mr. Chasse, you talk about the legal profession as though it is one monolith. I must, again, make the observation missed or ignored by so many commentators that the services and practice environments of barristers and solicitors should not be lumped together. The fees and services of small firm solicitors are very different from the practice imperatives of barristers. Solicitor services are extremely affordable and very competitive. In jurisdictions where those services have been removed or stolen from small firm solicitors, the result has always been higher costs to the public in exchange for reduced competence and lower service. Further, it is not the case that solicitors are still practicing with quill pens by candlelight. Solicitors are nimble, highly computerized (moreso than the barristers who do much more face-to-face work than solicitors do), efficient, frugal, increasingly using social media, etc., etc. Personally, I have not used a quill pen in over a week ever since the wick snuffed it.

    Remember also that real estate law and wills law are not simple commodities that can be safely reduced to algorithms or assembly lines. The people who think so or pretend to think so fall into four main camps.

    One, they do not practice in those areas and therefore do not know what they are talking about. Often, they will point to the uncommon case of a so-called “simple” will and extrapolate it to the rest of wills practice and then fail to accept or are blind to the fact that it is not ultimately helpful to the public to try to siphon so-called “simple” wills off to a greedy, assembly line firm while leaving all other wills to the more competent firms. For one thing, the greedy, assembly line firms generally produce documents that are little or no better than a kit will such that the client gets hoodwinked. For another, such firms upsell like mad such that the client still only gets a poor will but at a higher cost than the come-on price. And for another, such firms are very tempted to convince themselves and their clients that their client’s situation falls within a “simple” will and to do the will within the firm’s low level of competence so as not to lose the fee. This, of course, puts the clients at risk. A similar analysis can be done for real estate law, but would take too long for this blog. Suffice it to say that comparing the handling of real estate transactions to sloshing out cups of coffee betrays a level of ignorance (or self-interest) that is truly breathtaking.

    Two, they do practice in those areas but either do so badly or are willing to let their greed get in the way of their professionalism. If they are lousy or greedy real estate lawyers, they tend to suck on the souse of title insurance unaware of or wilfully blind to just how easily and exuberantly the title insurers evade liability under the wet tissues of the policies. If they are lousy or greedy wills lawyers, they either convince themselves that they will not be negligent or they hope that the clients will outlive them or their careers so that the negligence claims will arise only after the lawyers have died or have been retired long enough to be safe.

    Three (and I hope they are a small number), they know darn well that real estate law and wills law are tricky areas best handled by conscientious, non-assembly line, independent, fiercely competitive lawyers, and they know darn well that ABS would be a very bad development for those affordable legal services, but they are quite willing to sacrifice the affordable bar on a false altar of access to justice to deflect attention away from the one area that truly is a sky-high access to justice barrier. That way, they can pretend to have done “something” about access to justice while simultaneously doing nothing about the real barrier and harming the non-barriers.

    Four, they are not even lawyers (and thus do not understand the legal profession even though they claim they do), but are management consultants and the like, who see themselves profiting from being ground-floor gurus selling their services to entities desiring to transition into ABS.

    With respect, commentators need to take more care to understand and point out that the unaffordability problem, the real access to justice problem, is overwhelmingly the ruinous time and cost of litigation. If litigation were affordable, we would not be having this conversation. Mr. Chasse, you are right in saying that the Law Society has done very little in addressing that barrier. This has been the case for many years, even after the failure is repeatedly pointed out. Yes, there has been some discussion on such issues as more public education (which I strongly support) and examining ways for our First Nations peoples to resolve disputes without resort to the court system (which I also strongly support – anything to keep anyone away from the court system), but virtually no time has been spent on looking at effective ways to eliminate costly and ultimately unnecessary stages in the litigation process or at ways to encourage lawyers to bring about early resolutions.

    Instead, we waste our time and resources looking at how to reduce the cost of a will or how to turn real estate over to two or three corporations that are part of a “dysfunctional” and “invidious” industry. We further waste our time claiming to be interested in ways to protect such areas as PI and real estate law when there are no protections at all that would stand up over time.

    Note also that even if the investing corporations were not part of a dysfunctional and invidious industry, they nevertheless would still have very strong interests that are very different from the interests and ethos of the legal profession.

    The Law Society’s failure to devote appropriate time and resources to the real access problem is, and I say this with sorrow, insupportable. There is only one way to correct that ongoing failure, and one only, and that is to strike a committee with a mandate to recommend effective ways to truncate the time and reduce the cost of litigation and then have Convocation take those recommendations to the Government. Anything else is smoke.

    While some barristers are part of the problem (the best try not to be), the real causes of the ruinous time and cost of litigation are (a) the litigation system set up by the government in a misguided attempt to discourage litigants from ever getting to a judge (as the judges, court staff and courts are costs to the government), and (b) the burgeoning numbers of lawyers trying to do barrister work which is the result of the desire of the law schools for more money irrespective of the public interest.

    The notion that continuing to increase the number of lawyers per capita will cause the cost of legal services to drop is incorrect. If it were true, then the US would have the lowest cost legal services in history because they have the highest number of lawyers per capita in history. Instead, they have the highest cost legal services in history mostly because they have the highest number of lawyers per capita in history. US lawyers do not have enough clients per lawyer to make a decent living. Thus, to stay busy, they have to conjure up work on both sides of the “frivolous and vexatious” divide. This is very expensive, though hard to measure, to governments and to the public weal. Fleshing out this point would take more space than I have time for, but it is a telling point.

    The other main reason is the number of stages in the litigation process. Each stage is separated by roughly six months. This requires the lawyer to prepare afresh at each stage and update the research. All of that takes considerable time, and time is money. Moving to fixed fees does not change this equation because as the fixed fee runs out, the pressure rises to enter into a new fixed fee arrangement to prevent the lawyer from losing interest in spending a lot more time on a file where that time will not be compensated.

    Part of the answer is to get rid of several of the stages, and impose resolution deadlines on the parties on the pain of a judge’s wrath. Again, there isn’t space and time in this blog to flesh that out, but, in summary, fewer barristers per capita (so that they are busy enough to eschew frivolity) and a much truncated litigation process are the only truly effective ways to reduce the ruinous time and cost of litigation. All other efforts are nibblings at the fringes.

    Lastly for present purposes, the musings about taking regulation away from the Law Society are misguided and even dangerous. The problems can be solved, and the public can hugely benefit, without taking self-regulation from the profession. Having the profession regulated by the appointees of the government is not a recipe for the long-term health of the independence of the profession, an independence that has immeasurably benefited the public and our society.

    Many supporters of ABS sincerely believe that ABS will be some sort of panacea or that it will be somehow beneficial (though they are unclear on how) or that we can put in restraints that will never weaken. They are tragically mistaken on all counts. Some of them have grown complacent about our independence – a very dangerous development. They need to shake off that complacency and read some history. Others are in it for the money, dazzled by the money a handful of opportunists have made in Aus and the UK. Regardless of their motivations, ABS supporters need to put the real public interest foremost and, if they do that, they will reject ABS for what it would be – a wholly unnecessary, irreversible blunder of epic and historic proportions. Instead, they will focus their energies on ameliorating the ruinous time and cost of litigation – the real problem.

    One could literally write a lengthy book on these issues, but that is enough for now.
    Brad Wright