Regulating Law Practices as Entities: Is the Whole Greater Than the Sum of Its Parts?

In Canada, law is largely a self-regulating profession: our Law Societies create and administer standards of lawyer conduct as means of guarding our professional independence and promoting lawyers’ professionalism. But as the legal profession absorbs shockwaves from increasing globalization, technology, and liberalization, it’s worth asking whether the public interest continues to be served by traditional means of regulating lawyers’ conduct. As the practice of law changes and innovates, what’s the best way to ensure standards are met amongst lawyers – and how do we ensure any standards at all for non-lawyers involved in new models of legal practice?

For the most part, our current regulatory system kicks into operation after the offending conduct has occurred, and encompasses complaints about only individual lawyers’ conduct. But there’s a new prospect on the horizon: pro-active entity regulation. In addition to looking at the conduct of individual lawyers, pro-active entity regulation looks to the institutional context in which lawyers work and tries to identify and fix shortcomings or gaps before they translate into problems for clients. Earlier this year, the CBA developed an “Ethical Practices Self-Evaluation Tool” that firms can voluntarily use to self-assess the ethical infrastructure in their legal practices. But what about regulators getting involved?

Other jurisdictions have been innovating in this area and preliminary studies of some of these innovations suggest that entity regulation can result in better legal service delivery. For example, in “What if We Didn’t Wait? Promoting Ethical Infrastructure in Canadian Law Firms”, I cited research showing that client complaints against law firms had decreased on average by a third in New South Wales, in cases where such law firms are mandated to adopt appropriate management systems. If it makes clients happier, and ensures better services, isn’t that our answer?

In the same piece, I also shared optimism that promoting and monitoring appropriate management structures within law firms could result in more collective responsibility for ethical breaches. It’s not uncommon for clients to interact with many lawyers if bringing a complex matter to a law firm. In today’s regulatory system, against who should complaints be levied if there’s a pattern of ethical breaches exemplified by all lawyers on the file – or the non-lawyers who also contribute to work on the file? Professor Adam Dodek, member of the Legal Futures Initiative’s Education and Training Team, believes this exemplifies a collective failure within a law firm, rather than simply the acts of individual lawyers, and thus demonstrates a gap in the regulation of lawyers (see his 2012 paper Regulating Law Firms for more).

Entity regulation is also promising in its acknowledgement that law firms have distinct cultures, and that those cultures can serve as counterweights or interpretive lenses to the ethical obligations possessed by all lawyers. As set out by Professor Elizabeth Chambliss in a 2005 Fordham Urban Law Journal article, proponents of entity regulation believe that individual lawyers conform most to the norms and expectations of their law firms; if their law firms possess a healthy internal mechanism for ethical compliance, that mechanism may create the greatest influence on an individual lawyer’s conduct. What are the policies and cultures of today’s legal workplace that can positively or negatively impact a lawyer’s ethical conduct? And what are the tangible ways by which our regulators could manage something as nebulous as law firm culture?

Many futurists envision an adoption of Alternative Business Structures (ABS) in Canadian jurisdictions, and point to initiatives like the Law Society of Upper Canada’s ABS Working Group as proof of impending change. Although diverse in nature, ABS can involve structures that enable outside investments in law practice. The CBA Legal Futures Initiative’s Ethics and Regulation Team member Lisa Fong playfully asks what would happen if Starbucks were to own a law firm, but she raises real concerns about lawyers’ professional duties being compromised if business owners were involved in law firm governance. Yet the prospect of big chains offering legal services is already a reality in some jurisdictions, like in the United Kingdom where one of the country’s largest retailers now offers legal services. If the future of legal practice involves non-lawyer owners, how do we ensure that core values of the legal profession such as our bedrock guarantees of client commitment and fidelity to the law continue to be protected in new models for the delivery of legal services?

If you have opinions about any of the issues raised above, or want to learn more, join me on December 3 at 7pm ET for the next #cbafutureschat. If you’ve never participated in a Twitter Chat before, it’s a mix of a networking event and a retro ‘chat room’. Questions are asked by a moderator, and everyone is free to respond and engage with each other’s ideas. It’s a great way to get new perspective on issues, connect with new and interesting people, and provide valuable feedback to the CBA’s Legal Futures Initiative.