The News of ABS’s “Aliveness” Has Been Greatly Exaggerated

My previous Slaw post has generated, among other things, an unprofessional (and since deleted) comment and criticism that ABS is not dead as I suggested, because the Working Group has only determined that “majority control” by non-legally trained people is dead.

It’s true from a purely technical point of view that ABS can exist with minority ownership by non-legally trained people.

It’s also true that a comatose person whose body is functioning only with the support of a machine, is not dead.

I see remarkable similarities between the ABS debate and those surrounding MDPs at the turn of the century “when that evil Donahue & Partners and Ernst & Young got together to destroy the legal profession” (sarcasm) – and I foresee that ABS will suffer a similar fate.

As most lawyers in this province are aware, multi-disciplinary practices (MDPs) have been permitted in Ontario for nearly 15 years. MDPs effectively permit non-legally trained people to own/control up to 49.9% of the entity.

Students of history will immediately see the remarkable similarities between the venomous debate over MDPs in 1999 – 2000, and those currently surrounding ABS. In fact, the same arguments used by MDP opponents (core values will be eroded and non-lawyers will do bad things – all without a shred of proof) have been been dusted off and recycled by ABS opponents. See the unflattering comments on page 2202 in a Fordham Law Review article in connection with the poor quality of the MDP debate in Ontario.

And, the Canadian Bar Association, as it has did with its Futures Initiative, prepared a report on MDPs, recommending that:

MDPs be recognized to provide greater scope for choice and innovation regarding the provision of services by lawyers and others.

Lawyers in MDPs be subject to the rules of professional conduct of the law societies and remain responsible for ensuring that the services they deliver comply with all such requirements.

…. there be no distinction drawn between MDPs involving practices, such as Captive Law Firms and fully integrated partnerships; and there be no restriction on the kinds of services provided by MDPs.

There be no requirement of control of MDPs by lawyers.

In the end, the Law Society of Upper Canada ignored the Canadian Bar Association (as it also did in 2015) but agreed after much consideration to permit lawyer-controlled MDPs.

However, the regulations for MDPs are so restrictive and protectionist, that the MDP structure has been rendered entirely unattractive to non-legally trained persons.

The promise of innovative approaches to legal service delivery for the benefit clients has been regulated into obscurity.

I have excerpted portions of Section 18 of Part 3 of By-Law 7 below so that you can judge the protectionism for yourself:

A licensee shall not enter into a partnership or an association that is not a corporation with a professional unless the following conditions are satisfied:

The professional…… is qualified to practise a profession, trade or occupation that supports or supplements the licensee’s licensed activity.

…..

The professional agrees with the licensee in writing that the licensee shall have effective control over the professional’s practice of his, her or its profession, trade or occupation in so far as the professional practises the profession, trade or occupation to provide services to clients of the partnership or association.

The professional agrees with the licensee in writing that, in partnership or association with the licensee, the professional will not practise his, her or its profession, trade or occupation except to provide services to clients of the partnership or association.

The professional agrees with the licensee in writing that, outside of his, her or its partnership or association with the licensee, the professional will practise his, her or its profession, trade or occupation independently of the partnership or association and from premises that are not used by the partnership or association for its business purposes.

……

At the time that a licensee makes an application under section 20, the licensee shall file with the Society a copy of so much of the agreement or agreements that will govern the licensee’s partnership with the professional as may be required by the Society.

Such is the way of the Law Society of Upper Canada: “We’ll show you we’re progressive by allowing a minor innovation that will be regulated to such an extent you won’t want to use it.”

And has the promise of innovation and client service materialized within this highly regulated MDP regime?

Nope.

In fact, MDPs are so little used and understood that it seems the ABS Working Group isn’t even aware of them.

And because the Working Group doesn’t know that minority ownership/control is already permitted in this province, it firmly believes that it’s breaking new ground by agreeing to look into minority ownership ABS.

And I won’t be surprised when the ABS Working Group recommends an absurdly-regulated form of minority-owned ABS that mirrors the MDP rules.

Plus ça change, plus c’est la même chose.

And so, like with MDPs, the promise of ABS will die in obscurity – like a forgotten patient on life-support.

ABS may be alive in the theoretical sense – but for all practical purposes, it has been murdered.