Alternative Business Structures’ “Charity Step” to Ending the General Practitioner

(This is a short version of the FULL ARTICLE posted on the SSRN (pdf.). Articles cited herein without stated authors are those of the author of this article—Ken Chasse.)

The alternative business structures (ABS investors owning law firms)[1] debate is a very live one in Ontario, and will be throughout Canada, depending upon what the Law Society of Upper Canada (LSUC) at Toronto’s Osgoode Hall decides. ABSs could bring about the end of the general practitioner throughout Canada. If they are to be given an exception to the “unauthorized practice of law” (UPL) offence, so should the commercial producers of legal services—producers such as, LegalZoom, RocketLawyer, and LegalX. In the U.S., they have shown that they can rapidly eat into the market of the general practitioner. And they have begun to have a presence in Canada; see: LegalZoom.ca; and, MaRS launches LegalX. And RocketLawyer is soon to follow.

But because law societies in Canada have done nothing to try to solve the unaffordable legal services problem (“the problem”), they have undercut their ability to prosecute them for UPL for the reason that such organizations are not themselves licensed lawyers. And, ABSs cannot solve or lessen the problem. That will remain as a hindrance to such prosecutions of those who can—the commercial producers.

LegalZoom, etc., will fill a legal services economic vacuum—a vacuum that the law societies refuse to try to fill, at a time when, because of the volume and complexity of laws, people have never needed lawyers more. It contradicts and defeats what the Canadian Charter of Rights and Freedoms and Canada’s law societies are supposed to guarantee, i.e., rights, freedoms, the rule of law, and access to justice by way of affordable lawyers. (See for example, the duties set out in s. 4.2 of the Ontario Law Society Act.) If law societies won’t try, other sources should not be barred by such law society prosecutions. The commercial producers represent a possibility of providing relief from the problem which ABSs cannot provide. ABSs can finance the automation of routine legal services for individual law offices, but they cannot tailor the development and use of automation, and ride along with its development from the simple to the complex service the way that the large organizations that provide commercially-produced legal services can.

The legal profession needs its own management structure that will enable it to escape being controlled by ABS investors, and not be at the mercy of the commercial producers—a law society structure that can bring the benefits of automation and the progress of electronic technology to the population as effectively as any other management structure, and do it without being owned. The necessary components for such a management structure already exist, which include the precedent set for such a “law societies’ civil service” by Ryerson University in Toronto and the University of Ottawa by establishing LSUC’s bilingual LPP (Law Practice Program); see: Access to Justice—Unaffordable Legal Services’ Concepts and Solutions” (SSRN pdf., August, 2017).

Whether to allow ABSs investors to buy-into law firms in whole or in part ownership, whether as charities or commercial investors, has to be decided within this wider context. Ask your hard-promoting ABS law society benchers (lawyer-managers)[2] whether the automation that the investors say that they can finance will be able to provide the many forms of legal services that the commercial producers have created, as described in the FULL ARTICLE version of this article; (at pages 2-7, under the heading, “3. Published commentary on the commercial producers”). However it is said that, “lawyers and law professors are particularly ill-suited to address a post-LegalZoom world.”[3]

The ABS issue has again activated a long existing “class-oriented split” in the legal profession, specifically, between those lawyers whose clients can be ABS investors, and those whose clients are “of the people and small business and institutions,” i.e., the clients of the general practitioner, the solo practitioner, and the small unspecialized law office.

The latest proposal in Ontario’s ABS controversy is for the Law Society of Upper Canada (LSUC) to secure the necessary bylaw changes, “to enable lawyers and paralegals to deliver legal services through [non-profit “civil society organizations” (CSOs)], to clients of such organizations in order to facilitate access to justice.” That proposed approval of such “charity ABSs” comes from this statement on LSUC’s ABS website (quoted here only in part):

In June 2017, the ABS Working Group presented an interim report to Convocation outlining a proposal to enable lawyers and paralegals to deliver legal services through civil society organizations, such as charities, not for profit organizations and trade unions, to clients of such organizations in order to facilitate access to justice. … In its June 2017 interim report, the Working Group proposed that the Law Society amend its By-Laws to permit civil society organizations to register with the Law Society. Lawyers and paralegals would be permitted to provide legal services directly to clients through the registered civil society organizations.

Comments may be submitted online by September 1, 2017.

The request for comments resulted from demands for more consultation made by the large number of lawyers who are opposed to LSUC’s legalizing ABSs. See this June 30, 2017, legal news media blog article: “LSUC benchers push back decision on ABS.”

Allowing this “charity ABS proposal” will be used by law society benchers to campaign for the legalizing of all ABSs. That is to say, deciding whether to allow charity ABSs is to be judged within the wider context of the consequences of allowing all types of ABSs, and in the context of LSUC’s related management history. In this case, it is the money that representing ABS investors can produce. Holding out the promise of financing automation, would enable ABS investors to own (invest in) law firms. The lawyers (including benchers) representing such ABS investors will make millions of dollars in legal fees from representing them in individual negotiations with hundreds of client-starved law firms—like shooting fish in a barrel; the “fish” having no bargaining power. Opportunistic it is to press hard for the legalizing of ABSs at this time of a severely financially depressed profession and financially threatened law firms.

Has there been any discussion within LSUC’s Convocation of benchers as to the existence of a conflict of interest of those ABS Working Group benchers who are working hard to have the law society create the necessary bylaws?[4] And because of the great potential in investment profits and legal fees to be earned if LSUC allows ABSs, so will every law society in Canada want to do the same.

The ABS proposals are business proposals for making money. But unaffordable legal services are a social welfare problem. LSUC and the other law societies have made no effort to solve this problem. But, in sharp contrast, LSUC has given comparatively “fast-track” treatment to the ABS issue while the problem stands dormant without even an attempt at a solution. The problem doesn’t hurt the type of law firms whose clients could be investors.

So why does the majority of LSUC’s membership tolerate such preference given to the interests of benchers of law firms that serve large institutions and potential investors and not to solving the unaffordable legal services problems of middle and lower income people? It is because of ignorance of the cause of the problem, which is assumed without analysis, to be uncontrollable like the weather.

If left unchallenged, both ABSs and the commercial producers of legal services (LegalZoom, etc.) are a threat to the majority of law society members. Both involve the use of employee lawyers to service their employers’ customers and clients. Such employers are therefore, non-lawyer providers of legal services in need of a law society bylaw-based exception for their unlicensed UPL. And, there would likely be considerable public opposition to, and possibly government intervention into law society prosecutions if the commercial producers had developed a market that serviced many thousands of customers, as has happened in the U.S.

Given: (1) the misery and damage caused to the majority of the population by the problem; and, (2) the law societies’ refusal to try to solve the problem, the commercial producers have a strong argument that they should be treated as equal to the ABSs in providing relief from the consequences of the law societies’ breach of trust, i.e., their failure to perform the duties attendant to their monopoly over the provision of legal services. Such breach of trust may well be a violation of s. 122 of the Criminal Code, “breach of trust by a public officer.”[5] See: “No Longer Is It Possible to Be both a Good Lawyer and a Good Bencher,” Slaw, May 29, 2017.

That would further weaken the law societies’ position as a prosecutor of the commercial producers for UPL—a very biased, self-interested prosecutor fighting off a commercial threat, rather than prosecuting unlicensed individuals for that offence’s intended purpose of protecting the public from incompetently provided legal services.

Therefore, such an exception from prosecution created for ABSs, will greatly weaken the law societies’ ability to prosecute the commercial producers. In turn, that will greatly weaken the general practitioner’s chances of survival.

Law society neglect of the problem, which is in law, its duty to solve, has created a large permanent class within society that cannot obtain affordable legal services. That provides a basis for a Canadian Charter of Rights and Freedoms section 7, “life, liberty, and security of the person,” defence for the commercial suppliers of legal services against prosecution. Consider the relevance of the extensive analysis of, Chaoulli and Zeliotis v. A.G.s (Quebec & Canada), 2005 SCC 35, provided by this book: Colleen M. Flood, Kent Roach, and Lorne Sossin (eds.) Access to Care, Access to Justice—the Legal Debate over Private Health Insurance in Canada (University of Toronto Press, 2005). Chaoulli is a “deprivation of private medical services” case, comparable to a “deprivation of legal services” situation. Dr. Chaoulli won, and so should the commercial producers win, if law society neglect of the problem remains.

And because of the millions-of-dollars-potential of ABSs, the enabling of the proposed “charity ABSs” will inevitably lead to legalizing all ABSs. Thus the “charity ABSs” will set in motion a “slippery slope” to the abolition of the general practitioner. That is to say, in quick time, the definition of what is a “charity ABS” will become ever more charitable, particularly so for those benchers whose clients can be ABS investors.

See LSUC’s “Alternative Business Structures” webpage, from which its ABS Discussion Paper of September 24, 2014, can be downloaded (pdf). Then scroll down on that same site to see: (1) the hyperlinked list of, “ABS Working Group Reports to Convocation,” (LSUC’s “legislature of benchers”) and, (2) the hyperlinked, alphabetized list of 41 contributors’ responses to the Discussion Paper. Mine, (“Chasse, Ken”) 67 pages, can also be downloaded from the SSRN.

It was LSUC’s ABS Working Group benchers who wrote the ABS Discussion Paper, and the ABS Summary Report that summarized the responses to the Discussion Paper (see, Report to Convocation—February 26, 2015, tab 8.2). The Discussion Paper is not an unbiased presentation of relevant facts and issues. And the Summary Report’s descriptions of supporting and opposing statements and arguments are too brief, and their accuracy cannot be easily checked because they lack sufficient references to the specific texts from which such statements and arguments are drawn, as any formal writing should.

Those who wrote the Summary Report know that other benchers, in determining their voting position on the ABS issue, will very likely read only the Summary Report alone, and not the 41 responses. Therefore an impartial assessment of the integrity of the Summary Report is necessary. Conflict of interest is a concern—the conflict between benchers’ using their position as benchers to serve the fortunes of their law firms first, and the legal duties of a law society a very poor second.

And that June 2017 interim report states (page 3, para. 38): “…ABSs nevertheless have ‘real potential’ to enhance access to justice.” If that means that ABSs can help with the problem of unaffordable legal services, it is false. To be valid it has to mean that a “charity ABS” can provide routine legal services, and provide legal advice services below cost as a service of the charity, union, not-for-profit organization, or other CSO, that is providing them. The use of ABSs in Australia and England proved that ABSs are not relevant to the problem because they deal with routine legal services and not legal advice services. The June 2017 Interim Report (listed on LSUC’s ABS website) acknowledges that (paragraph 44 (page 4)).

The ABS Discussion Paper also strongly implies that it could be of assistance in dealing with the problem. For example, it quotes (page 13) percentages of unrepresented litigants, which percentages ABSs cannot help to alter. Although the decision-making capability of artificial intelligence is transforming whole industries, (see: “The Dark Secret at the Heart of AI”),[6] the automation that ABSs will finance, cannot yet help to reduce the cost of litigation. It is not a routine legal service.

As to the propriety of my statements of suspicion herein: where there are millions of dollars to be obtained, as might well be the motivation behind ABS proposals, and those who would so benefit are not sufficiently accountable to an appropriate authority, one should presume that there will be conflicts of interest and other forms of money-driven corruption. However, such is but a prudent presumption and not an inevitability without exception. But the onus of proof of integrity and purity of motivation and action beyond a reasonable doubt, should rest upon those who would so benefit. They should accept that, rather than displaying indignation, anger, and threats that draw strength from their “power of position.” Those who would not benefit and are suspicious and concerned should be able “to speak truth to power” by freely expressing their concerns without penalty, rather than “power” being able to project and impose its own “truth” without concern.

For the reasons and history detailed in the FULL ARTICLE version of this paper, the quality and purity of LSUC’s management is a concern.

ABSs concern “routine legal services.” But the problem is caused by legal advice services, i.e., services that require a significant amount of a lawyer’s time and advice. The majority of the population cannot afford them. Those lawyers and investors who wish to have ABSs made legal are looking to make a return on investment by way of providing routine legal services in greater volume. That is a commercial investment proposal. But the problem is a social welfare problem and ABS investors are not in the social welfare business. Below are cited the articles that provide the detailed explanations for my arguments.

The ABS Discussion Paper and the Reports to Convocation provide no adequate description as to how the financing that ABS investors would provide to law firms, would produce the innovation that would have any significant impact upon the problem. They could finance the automation for providing routine legal services, but such automation is something that the legal profession can provide for itself, better by itself without: (1) law offices having to be owned by investors; and, (2) the risk of the fiduciary duty owed to clients being suppressed by the resulting profit duty owed to investors.

All of the literature on the problem of unaffordable legal services is written by lawyers. But the problem is not a legal problem. And therefore there is no consideration of what other professions and manufacturers do in regard to their versions of the same problem. Such an analysis would show that the solution to the problem exists everywhere in the production of goods and services; i.e., the use of “support services methods” of production. They are the product of the kind of pressure that produces innovation. No pressure; no innovation. As a result, legal services are produced in the same way in which they have always been produced. And so the problem exists. It is a law society-caused problem, capable of a law society-caused solution. There being however, no law society attempted solution, other sources of a solution should not be barred—sources such as LegalZoom, etc.

ABS advocates do not propose to make any change to the method by which legal services are produced, such as moving production to a “support services method.” Therefore they can have no impact on the size and seriousness of the problem. The purpose of ABS investors is not to solve the problem but rather “to corner the market” for routine legal services because that’s where “the quick and easy money is.” It is not in the provision of legal advice services; the money they produce most often being neither quick nor easy, and therefore not yet ready for automation.

Legal services are unaffordable because of the method of producing them is obsolete. Where there has been the pressure that forces innovation, the manufacturing of services as well as goods has moved to a “support services method of production.” For example, the whole of the medical services infrastructure is made up of highly specialized, mutually-interdependent support services. It is like a honeycomb of support services; all highly specialized and capable of the high volume production that maximizes cost-efficiency and competence. There are no “generalists,” but rather specialized doctors, technicians, technical tests, drugs, and hospital services. Similarly, the “parts industry” is a massive and highly sophisticated support service for the automobile manufacturers. Its many “special parts companies” produce those parts or services of a total product or service that cannot be made to provide a sufficient contribution to profit unless they are produced by a highly specialized, high volume support service.

It has long been known that maximizing the cost-efficiency of one’s own office or factory is not enough to guarantee affordability. Therefore the support services method of production exists everywhere except in the legal profession. ABSs can merely improve the cost-efficiency of the law office but they cannot create the support services that the affordability of legal advice services requires. And the legal profession itself can obtain the automation that produces greater cost-efficiency.

The ABS Summary Report refers in several places to financing for law firms that would bring about innovation. Firstly, there is no description of what that innovation would be. And secondly, innovation within law firms will at best, make individual law firms more cost-efficient. It will not enable law firms to provide affordable legal services. To do that, external highly specialized support services are required.

Law societies should be sponsoring such support services so as to take advantage of this important management principle: “nothing is as effective at cutting costs as scaling-up the volume of production.” If medical services were provided as legal services are, doctors, like lawyers, would work separately in highly ‘silo-ed’ offices that share nothing. But the pressure that spawned socialized medicine also created the honeycomb of specialized cells that constitute the infrastructure by which medical services are provided.

Trying to improve the way legal services are presently provided without creating the necessary support services is like adding a motor to a bicycle when the solution requires a motor vehicle. That is why law society “access to justice” committees have made no progress towards a solution. And that is why the innovation for individual law firms as financed by ABSs will not end the unaffordable legal services problem. If the problem were solved, all ABS proposals would be unnecessary and irrelevant.

The assumption that legal services are now produced by lawyers in the only possible way of producing them, has no basis in fact. There has been no study of the cause of the problem by the appropriate experts. It is not a legal problem. It requires expertise that lawyers do not have. But they don’t retain (hire) that expertise. As a result, law societies have no program to solve the problem of unaffordable legal services, and their “access to justice” committees have made no progress towards a solution, while the victims continue to grow.

An example of a very effective support service would be the production of legal research services and products. They could be more competently and cost-efficiently provided at-cost by a highly specialized, high volume legal research support service. At Legal Aid Ontario (LAO), LAO LAW’s technology of centralized legal research (successfully operative since Tuesday, July 3, 1979), combined with CanLII’s national market and great potential earning power, is an example described in the Access to Justice article cited in the last paragraph below. And because almost all evidence used in legal proceedings and services now comes from complex electronic systems and devices, few lawyers are able to challenge the reliability of such sources without the help of a specialized legal research unit.[7] And so, we have the possibility of life imprisonment for murder, based upon the evidence produced by an electronic system maintained merely to a commercial standard and not so as to guarantee “proof beyond a reasonable doubt.”[8]

The “continuing professional development” programs (CPD and CLE programs) that lawyers must take every year don’t provide such knowledge and information, and therefore, nor do electronic discovery in civil proceedings and the disclosure that the Crown is required to provide to accused persons in criminal proceedings. Ignorance of technology prevails in the profession. As a result, so it does in the case law, both substantially and procedurally, i.e., the changes in procedure that various new technologies should dictate. That is why a legal research support service is necessary. Only one is needed to serve all lawyers in Canada. CanLII can do it. Bigger is better.

There are many other parts of lawyers’ work that could be supplied by such support services. And those services that are compatible with flat-fee billing (instead of hourly billing) are also the services that are most easily automated—see: “Automation, Support Services, and Flat-Fee Billing” (Slaw July 28, 2017). But allowing ABSs to own law firms is the most expensive way to get that automating software. All lawyers bargaining as a single unit is the least expensive way, e.g., represented by the Federation of Law Societies of Canada, or by a civil service-type agency serving all of Canada’s law societies. Like the unaffordable legal services problem, all major problems of law societies will be national problems requiring national solutions.

Law societies are now like an elected government without a civil service. Therefore they lack the ability to govern, i.e., they don’t have the competence to cope with such major problems because such problems are not legal problems. And law societies don’t retain the necessary expertise with which to produce the innovations that would keep legal services affordable. How to create the necessary “civil service advisory agency” for law societies and pay for it, is set out in that last article cited below.

For example, the ABS Discussion Paper states (p. 11) that one model of ABSs allows for, “law firms operating as franchises [of the investor] so they have centralized access to management systems, technology, marketing and other expertise.” But those same services can be provided by a national law society civil service agency, and do so without law firms having to be owned, enfranchised, and controlled by a profit duty that can conflict with a lawyer’s duty to clients.

Because law society management structure has not changed since its 19th century creation (Monday, July 17, 1797, for LSUC, while the French Revolution still raged, as did Britain’s trans-Atlantic slave trade until 1807), law societies are not capable of solving the unaffordable legal services problem by sponsoring the innovations that would enable law firms to produce affordable legal services. Now the complexity and size of the major problems of law societies means that, “No Longer Is It Possible to be Both a Good Lawyer and a Good Bencher” (Slaw, May 29, 2017). But because law societies are not accountable in fact for their performance, benchers are free to choose to be good lawyers and neglect being good benchers. And they are doing nothing to resolve that conflict.

Instead, law society benchers content their sense of duty and legality with “alternative legal services” (ALSs)[9] and ABS proposals even though they know from the use of ABSs in Australia and England, that they cannot solve the problem. ALSs are simplistic, mere charity, and do not provide a solicitor-client relationship with its fiduciary duty.[10] Charity is an insult to that majority of taxpayers who cannot afford a lawyer but must pay for the justice system. They say, “I Don’t Want a Free Lawyer, I Want a Real Lawyer,” (the Lawyerist.com, November 14, 2016). That title succinctly states the insult.

Instead of ABSs and ALSs, law societies should be coping with the fact that very aggressive commercial organizations like, LegalZoom, RocketLawyer, and LegalX are on their way to replacing the general practitioner, i.e., replacing more than half of law society membership. Their American advertising is both sophisticated and everywhere. It is unopposed by law society advertising—not even a rear-guard action to protect the general practitioner.

The strategy of such commercial, highly competitive producers is based upon affordability and maximizing the use of automation and its very rapid progress from the simple to the complex service—the very things that law societies should be helping law offices to achieve. They are unopposed because there are no law society public promotions of the advantages of the solicitor-client relationship and law society discipline and oversight, along with professional insurance, over the merely buyer-seller relationship of the commercial producers. But legal services would have to be made affordable before such promotions could be launched.

However, it didn’t have to be that way if lawyers had applied the necessary pressure to their law societies that forces the innovation that brings affordability. And it wouldn’t be that way if governments would hold law societies accountable in fact, and not merely in law, to the democratic political process for their failure to perform their statutory duties.

The progress of the commercial producers of legal services shows that they will not be much hindered by prosecutions for “the unauthorized practice of law.” See: (1) “’Counsel, I Demand Justice!’” – ‘Most Definitely! How Much “Justice” Can You Afford?’” (Slaw, April 10, 2017); and, (2) “Technology, the Fiduciary Duty, and the Unaffordable Legal Services Problem” (Slaw, December 6, 2016). And see also the several books by Richard Susskind (cited in the third paragraph of the, “’Counsel, I Demand Justice!’” article).

If we lose the general practitioner’s market to the commercial producers, we will never get it back. And because general practitioners are more than half of law society membership, they are the lawyers whose greater contact with middle and lower income people determines the reputation of the legal profession. And when they are gone, courts and judges will be much less important to society. Why should people continue to respect and pay for a justice system they cannot use? Best we abolish law societies. Or, is it possible to make them adequately responsive to public need? Read the FULL ARTICLE.

Lastly, see the solution in: “Access to Justice—Unaffordable Legal Services’ Concepts and Solutions” (pdf., August, 2017).

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[1] Alternative business structures (ABSs) involve law firms becoming investment properties. The investors would provide: (1) financing for the automation of routine legal services; (2) more advanced marketing techniques; and, (3) enable related non-legal services to accompany the provision of legal services. But because ABSs would not change the method whereby the work is done to produce legal services, they have no capacity to solve or reduce the problem of unaffordable legal services. That problem is caused by the unaffordability of non-routine legal services.

[2] “Bencher”-Canadian usage: the terms bencher and treasurer are in use by the legal profession in Canada. A bencher in the Canadian context is a lawyer elected by the other lawyer-members of the law society to be its board of directors (referred to as “Convocation”). The treasurer is elected by the benchers to function as the chair. Paralegals are also elected as benchers in those provinces where the law societies govern the paralegal profession.

[3] Law Professor Benjamin H. Barton (University of Tennessee College of Law), Glass Hall Full—the Decline and Rebirth of the Legal Profession (Oxford University Press, 2015), p. 175.

[4] Under s. 56(4) of Ontario’s Law Society Act, bylaws can be enacted that allow non-lawyers (e.g., investors owning law firms) to, “practice law or provide legal services” (s. 26.1(5)). Such bylaws are enacted by a board of five trustees of whom two are appointed by the Attorney General of Ontario, and three by the law society (s. 54(1)). Such non-lawyers would thus avoid prosecution for “the unauthorized practice of law” (s. 26.1).

[5] For purposes of Criminal Code s. 122, see the definition of “public officer” provided by, R. v. Boulanger 2006 SCC 32, which elucidates the constituent elements of the offence. And such a self-interested prosecutor violates a fundamental rule of prosecution, “the Crown never wins and the Crown never loses.”

[6] The “dark secret” is that it is not known how the most advanced of these systems work—they can program themselves. But, “Starting in the summer of 2018, the European Union may require that companies be able to give users an explanation for decisions that automated systems reach. This might be impossible… .”

[7] Examples of very frequently used evidence from complex systems are: (1) records from complex electronic records management systems, which are now the most frequently used kind of evidence; (2) mobile phone tracking evidence, because we all carry mobile phones; and, (3) the blood-alcohol readings from breathalyzer/intoxilyzer devices that are the foundation of almost all impaired driving and “over 80” prosecutions (over 80 milligrams in 100 milliliters of blood). They are frequently far from perfect in their manufacture, use, and maintenance.

[8] Mobile phone tracking evidence was critically important evidence in the pre-murder trial voir dires in: R. v. Oland 2015 NBQB 245; and, 2015 NBQB 244. The result was a conviction for second degree murder.

[9] Alternative legal services are: clinics of various types, self-help webpages, phone-in services, paralegal and law student programs, family mediation services, court procedures simplification projects, public legal education information services, programs for targeted (unbundled) limited retainer legal services (as distinguished from a full retainer to provide the whole legal service), pro bono (free) legal services, and the National Self-Represented Litigants Project, the purpose of which is to help self-represented litigants to be better litigants without lawyers. See: “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” (pdf.).

[10] Pro bono’s free legal services are provided within a solicitor-client relationship, but they are available to serve only short, simple cases. And “targeted legal services” provide much less than that.