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Thursday Thinkpiece: Rainsberry on Online Dispute Resolution

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Online Dispute Resolution: Filling the Void Left by Lawyers’ Monopoly on Legal Services and Compelling a Regulatory Reckoning in the Conflict Marketplace

2022 CanLIIDocs 1480

David Rainsberry is counsel at LAWPRO. David completed his Master of Laws degree (LL.M.) in June 2021 and now manages a complex portfolio of malpractice claims in related areas of practice.

[Footnotes omitted. They can be found in the original via the link above]

1 Introduction

Lawyers enjoy a monopoly on the practice of law in Canada: the absence of competition has exacerbated the access to justice crisis by making legal services too expensive. Proposed non-market-based solutions, including enhanced legal aid and mandatory pro bono, are either unrealistic or inadequate to the task of ensuring that the millions of Canadians who need legal advice can afford to get it. These proposals also assume that the existing legislative constraints on the supply of legal services will remain unchallenged by competing market forces and relatedly, that lawyers will continue to be involved in all aspects of the industry. But the unmet need for access to justice is too pervasive a problem for these assumptions to be maintained. The inability of ordinary Canadians to get legal advice has not only begun to erode the public’s confidence in the self-regulatory authority of lawyers to control market participation but also given rise to new technologies aimed at supplanting traditional legal services altogether. Online dispute resolution processes that offer a complete alternative to the justice system are unique among these innovations because they do not require lawyers and are relevant to a significant body of work traditionally dominated by the legal profession. ODR has the potential to compel a long overdue reckoning with the principles underlying the monopolistic presence of lawyers in the conflict marketplace. The profession now has a choice: help fix the problem of access by insisting on a future regulatory role as a condition of enforcing ODR settlement outcomes or cede market share and rebrand as a more expensive but preferable option for the resolution of disputes.

2 Access to Justice and the Legal Profession’s Monopoly on Legal Services

The enormity of the access to justice crisis cannot be overstated. In any given three-year period, half of the Canadian population will encounter a legal problem and struggle to retain counsel. There are myriad interrelated reasons for the lack of readily available legal advice but cost is the greatest. The absence of affordable lawyers has been particularly hard felt by those in search of formal and informal resolutions to disputes: “the entire justice system – both inside and outside the courtroom – falls far short of providing access to the knowledge, resources and services that people need to deal effectively with civil and family legal matters.” Because conventional litigation is prohibitively costly for the poor and middle class, more and more individuals are forced to represent themselves and the resultant “rising tide of self-represented litigants” has “burst into prominence” as a phenomenon in dire need of a solution. Yet the reality is that the appearance of ever-greater numbers of self-represented parties in courtrooms across the country is symptomatic of a deeper regulatory problem.

Underlying the barriers to access is the stranglehold lawyers maintain on the provision of legal services. This veritable monopoly constricts supply. When demand exceeds supply, the inevitable consequence is an increase in cost:

It lessens competition in the legal marketplace, making it difficult for non-lawyers…to provide some legal services that are arguably within their competence at a lower cost [and] lead[s] to lawyers performing relatively simple tasks while charging their full hourly fees to do so.

While the “practice of law” is not all-encompassing in scope and non-lawyers are permitted to provide some services (not advice) in limited circumstances depending on the province, the overwhelming majority of activity in the legal industry is undertaken by lawyers.

In Ontario, for example, paralegals are confined to a narrow band of small value or low implication litigation: “…[they] may provide legal services with respect to small claims matters, provincial court matters for provincial offences and summary conviction offences under the Criminal Code, and before administrative tribunals.” In the family law sphere, where the need for reform has been apparent for years, the Law Society of Ontario appears poised to take modest steps toward alleviating access to justice concerns by expanding the scope of work that paralegals are allowed to engage on under a new licensing model dubbed the Family Legal Services Provider License. In addition to legal advice and draft documents, this new license would allow paralegals to facilitate simple divorces, parenting and child support orders. However, even these marginally expanded functions proposed for non-lawyers in one area of law attract extraordinary resistance from the Ontario bar. The profession contends that cost barriers will remain because paralegals’ rates are not meaningfully lower and the representation they offer, less comprehensive. The woefully inadequate training will inevitably lead back to a need for counsel fees and corrective measures:

‘family law matters regularly intersect with other areas of law ranging from corporate law and tax law to criminal law and immigration law. A lack of knowledge or a failure to spot an issue can have catastrophic impacts on a client and family, and a main focus of law school is to teach lawyers to do that exact type of issue spotting.’

After five years since the Family Legal Services Provider License was originally conceived by Justice Bonkalo it remains unimplemented and under consideration by the Law Society of Ontario. One of the progenitors of the effort to involve paralegals in areas of practice traditionally dominated by lawyers identifies an underlying cultural norm as the reason for slow uptake: “Professor Julie Macfarlane…attributes the family bar’s ‘tremendous resistance to loosening [their] grip’ to the ‘underlying…culture…that says lawyers have to have their hands around everything.’” The underpinnings for the profession’s resistance to market infiltration is also usefully cast in purely economic terms: “lawyers’ opposition to paralegals providing any family law services independent of lawyer supervision smacks of heavy-handed protectionism…”. As it stands, the bandwidth for non-lawyer participation in the provision of legal services in Ontario is highly limited and efforts to loosen the reins continue to face considerable opposition.

This desire by lawyers to maintain a monopolistic presence in the legal marketplace also manifests as regulatory constraints on business structures, which are limited to solo practices and legal partnerships and preclude fee sharing with non licensees. Related prohibitions on non-lawyers holding management and ownership roles in the enterprises that supply legal services further stifles the market by impeding alternative business models and other potentially facilitative inter-professional ventures. In effect, existing regulation lessens competition, which makes legal advice too expensive for the vast majority of individuals who need it most: “the legal profession…operates in a cartel-like fashion…and its pricing structure uniformly caters to corporate money.”

When juxtaposed against other jurisdictions that have allowed for greater participation by non-lawyers in the delivery of legal services, Canada’s regulatory environment surfaces among the worst for the enhancement of access to justice:

“Canadian…lawyers are remarkably self-regulated, which unsurprisingly results in the market for legal services’ being dominated by lawyers and non-lawyers’ being largely frozen out. These regulations are at least part (and maybe all) of the reason why middle-class consumers have less access to legal advice and assistance in Canada…than in the United Kingdom or European civil law jurisdictions.”

Canada’s highly regulated marketplace and lack of alternatives to expensive lawyers has it languishing well behind other developed nations on the world stage. Its ignominious “…eighteenth place ranking in the World Justice Project Rule of Law Index, 2015 in terms of the accessibility and affordability of its civil justice system” has only been made worse in recent years. In the 2017-2018 Index, Canada assumed position at twentieth behind the Netherlands, Denmark, Germany, Norway, Sweden, Australia and the United Kingdom to name just a few. Differences in the way these countries regulate the legal profession is attracting increased scrutiny as a potential culprit in the access to justice crisis:

Scholars in America and Canada have placed at least some of the blame on the regulatory environment in those countries…the North American legal profession has an unusual amount of self-regulatory authority…one result of this control is strong bans on competition with lawyers…and expensive requirements for entering the profession.

In sharp juxtaposition, the countries ahead of Canada in the accessibility and affordability index have made regulatory reforms, including allowances for increased competition:

the [UK] and Australia, are…radically revamping and shrinking the regulation of their legal professions…to address middle income access to justice issues…[the UK] allows non-lawyers to provide legal advice…organize in alternative business structures…the biggest states in Australia have taken a similar approach…[and] the results have been pretty encouraging.

Wealth imbalances and a lack of non-market-based initiatives obscure the single most important factor in the access to justice crisis: “the problem of inadequate access to legal services is not fundamentally one of poverty, insufficient commitment by lawyers to pro bono work or insufficient government funding…at its root, the problem is one of regulation.” And, while “[t]here appears to be no serious dispute that the traditional unauthorized practice of law prohibitions contribute to the access to legal services gap”, there is a tendency to ignore or assume them to be unchangeable in the quest for a solution: “access to legal services is not being given the priority that it ought to have as a legal profession regulatory issue…major stumbling blocks to significant change are the failure to recognize that this regulation is squarely within the purview of the governing bodies and how urgently it is needed.”

3 Legal Aid and Pro Bono: Failures in Practice and Imagination

The legal profession has long been aware of the pressing need for change in the delivery of legal advice, but the proposed non-market-based solutions, including improved funding for legal aid and obligatory pro bono, have never been realistic or adequate to the task. Beyond their shortcomings as practical solutions to the access to justice crisis, these proposals also lack imagination because they remain rooted in the misguided belief that a commercially viable alternative to the justice system will not soon challenge lawyers’ monopoly on legal services.

Enhanced legal aid is notionally appealing to lawyers because a better resourced public program would mean more money without sacrificing regulatory control over the private marketplace: “‘if the government funded legal aid properly tomorrow, access to justice issues would be addressed.’” Unfortunately, this pronouncement does nothing to advance a solution because it ignores that there is neither the political will nor the capacity to create a program capable of meeting the overwhelming need without bankrupting government. Provincial legal aid programs have seen significant cutbacks for decades, which has led to the elimination of services in certain areas of law or other restrictions on eligibility: “the income…cut off for access to legal aid shows just how restricted this type of assistance is in practice and contributes to the lack of affordable services for a broad spectrum of Canadians.” Presently, legal aid is confined to low-income earners and even within that economic stratus, only for limited types of legal problems. The hourly fees of lawyers and the cumulative cost of bringing even simple legal disputes to trial well exceeds the annual median after-tax income of low to middle class Canadians. The “retrenchment of the state from welfare driven programmes” is irreconcilable with the creation of a viable solution to the access to justice crisis going forward: “the likelihood of governments fully responding to the legal aid crisis in the new economy are extremely slim.” The federal and provincial governments lack the will to maintain, much less enhance, financing for these programs and even assuming there was sufficient impetus to do so, public resources are inadequate to the task.

Pro bono legal service, particularly when left only to willing members of the profession, is also ill fated as a prospective solution to the access to justice crisis in Canada: “there is no doubt that voluntary pro bono cannot bridge the access to legal services gap.” This recognition that volunteerism is an inadequate response to the problem has prompted calls for mandatory pro bono service requirements for all practicing lawyers. But even assuming principled arguments against compulsory pro bono could be overcome, significant impediments to implementation would remain: “it would be administratively impractical to coordinate the provision of pro bono services, monitor the quality of the service provided by a lawyer or…ensure there is compliance with any minimal requirements.” Although some retainers can be concluded quickly, many, and especially those requiring engagement with the justice system, can last months and years leaving little hope that pro bono is a viable solution to the crisis: “a minimal level of services of largely unverifiable quality cannot begin to meet [the] nation’s massive problem of unmet legal need.” Even proponents of mandatory pro bono requirements concede that the regulatory proposal is not a standalone fix: “no one has ever seriously argued that pro bono is a ‘solution to the access to justice crisis.’”

The practical limitations on these non-market-based solutions to resolve the access to justice quagmire should have removed them from the pool of active considerations long ago and yet they persist because there is a conceptual block rooted in lawyers’ monopoly on legal services that forces them back into the conversation: “this question of who or what is regulated…was not asked frequently because there was…perfect overlap between lawyers and legal services.” When the role of regulation in the creation of the problem is not prioritized the assumption that lawyers will continue to maintain monopolistic control over legal services becomes the framework for failed proposals that depend on the moral responsibilities of the state, lawyers or ill-fated appeals to duty: “in exchange for their monopoly, autonomy and independence there is a corresponding obligation on the legal profession to ensure that there is equal access to law for all members of the community.” This inability to imagine an alternative to lawyers’ monopoly in the legal services industry has now been challenged by the emergence of new technologies and in the dispute resolution arena the anticipated impacts are expected to be profound:

ODR initiatives (particularly, the widest and most successful of them) shows…that litigants could interface with the system on their own. Depending on the system, lawyer participation is precluded [British Columbia’s Civil Resolution Tribunal], rendered superfluous by design [United Kingdom’s Online Court], or unrequired and only utilized in complex cases (China Internet Courts).

There are leading academics committed to understanding the future regulation of the legal profession, including some who specifically urge analysis through the lens of access to justice, but few lawyers who acknowledge that there is a market force on the horizon with the power to displace them entirely.

4 ODR: A Standalone Alternative to the Legal Profession

ODR refers to a wide spectrum of services that include administrative, communication related and substantive functionality. At its core, the phrase means “the use of online environments to facilitate communications and dispute resolution”. While other definitional parameters incorporate specific operational capacities and technologies used in furtherance of these central aims or integrate allusions to more familiar alternative dispute resolution techniques, this paper is centrally concerned with any online replacement for traditional court-based judicial decision-making. From among the various manifestations of ODR, those that offer a complete alternative to the justice system by not only removing parties from the physical confines of a courtroom but also by pre-empting the commencement of proceedings through assisted or automated negotiation, educating parties, directly influencing decision-making or employing an algorithm to make a decision are uniquely positioned to compel regulatory change because of their potential reach and operational independence.

A range of peripheral work normally performed by lawyers has been implicated by new technologies but ODR threatens to disrupt “a mainstay of traditional legal practice: the resolution of potentially multifaceted and unstructured disputes between parties.” And the more sophisticated and ubiquitous ODR becomes the greater its potential impact. In the short term, ODR may “displace lawyers who have previously engaged in low to mid value litigation.” In the not too distant future, even those that minimize the current impact of automation on lawyer employment concede that: “[ODR] could fall into the category of heavy employment effects given that when used, they entirely replace lawyers (and…judges as well).” The “far-reaching vision of ODR’s evolutionary potential” includes the use of big data gathered from interfacing with justice systems to create legislative and policy reforms that pre-empt conflict or self-enforcing smart contracts that utilize blockchain technology to bypass court enforcement entirely. While eBay’s resolution of “over 60 million disputes a year” or Modria’s success may not portend the elimination of disputes or the court altogether, the extraordinary cost of legal advice is certain to expand ODR’s market relevance beyond “small stakes e-commerce issues” to include a broader range of subject matter and clientele: “such technological alternatives arise at a time when legal services have become largely beyond the financial reach of the middle and lower classes, and even our nation’s wealthiest companies.” ODR’s potential reach and operational independence make it a “fundamentally disruptive” force that will “reduc[e] the market for legal services, particularly in the realm of litigation.” There is a certain inevitability in the evolution of ODR and related market disruption: “if an ODR program saves the court system money and satisfies parties, there is no inherent or compelling reason not to explore expanding use of the same platforms to cases of higher value.” For lawyers, the choice ahead is not between adapting their practice skills and extinction as some contend, but rather how to frame their involvement going forward.

5 Lawyers: Modified Regulatory Role or A Retreat from the Problem

The public interest and ensuring competence in the delivery of legal services are among the lead arguments underpinning the need for lawyers’ monopoly and self-regulation. Increasingly, these justifications are overshadowed by the access to justice quagmire because neither objective is realized when individuals have no alternative to hiring a lawyer they cannot afford. The public is disillusioned with the justice system and lawyers’ monopoly over it. More and more consumers are using ODR as the only efficient alternative. But the enforcement of ODR settlement agreements remains a problem: “…lack of enforceable outcomes constitutes a major hurdle for the development of ODR and considerably decreases the level of trust of the potential parties to an ODR scheme.” Much depends on whether the ODR service is binding or non-binding, and whether the dispute includes a cross-border component, but the central problem remains the same – a need to return to the courtroom and formal judicial decision-making:

If the outcome is binding between the parties, the winning party can go before the judge for enforcement. In the case of a non-binding outcome, there is nothing the party can do to have the decision enforced outside of private enforcement mechanisms or traditional court proceedings, where he will have to initiate a new claim.

The use of so-called private enforcement mechanisms is largely confined to e-commerce transactions. They include incentives to perform, such as feedbacks, ratings, trustmarks and automatic executions that require the use escrow accounts or chargebacks on credit cards. But, the fully panoply of enforcement powers, including garnishment, writs of seizure and sale and examinations in aid of execution depend on court order and as a corollary, interaction with the traditional justice system. Access to this power may hold sufficient commercial, rhetorical and substantive resonance outside the profession to leverage a future regulatory role for lawyers. The choice is clear: lawyers can help fix the problem of access to justice by insisting on a future regulatory role as a condition of enforcing ODR settlement outcomes or cede market share and rebrand as a more expensive but preferable option for the resolution of disputes.

The legal profession in the United States has seen more significant market competition from ODR than in Canada and some there are poised to insist on regulations that would hinder efforts to improve the access to justice crisis:

The most invasive proposals suggest a form of notice, opportunity to be heard, impartial adjudicators, and judicial review for every individual affected by automated decisions [and] that these rigorous requirements should even apply to private organizations, who do not meet the state actor requirement.

Public interest and competence concerns inform efforts to maintain “comprehensive human oversight (by a lawyer)” of ODR and ground rationalizations for continued regulatory control over the competition: “‘automation bias’ (wherein operators tend to blindly trust computer outputs), the desire for greater human involvement in justice, discomfort with the perceived opacity of [ODR], and the need to identify system inaccuracies.” These are more than parochial anthropocentric arguments for the involvement of lawyers but the trouble is they ignore the market realities arising from the unmet need for access: “efficiency is such a priority for clients, they are willing to forego traditional notions of justice and participate in ODR processes to benefit from their efficiency.” The contentions that new technologies threaten the protection of the public from “information asymmetries” or undermine “universal access to legal services” are not persuasive given the overwhelming number of involuntary self-represented litigants. But despite the fading market relevancy of these arguments in support of lawyers’ monopoly over legal services, there remains good reason to question the capacity of unfettered commercialism to solve the access to justice crisis: “we should remain cognizant that without regulation, the development and adoption of legal technologies will be driven by the market – a decidedly ineffective means of ensuring access.” Lawyers are not without leverage to insist.

Early interactions between the most prominent ODR and the American justice system signal the competition’s limitations: “a number of courts have simply found that the existence of an online dispute resolution option does not preclude adjudication in traditional courts.” The court remains the final arbiter for disputes and the only institution capable of enforcing settlements when one party decides not to comply. The pervasive use of ODR, and as a corollary, a solution for those who cannot afford the justice system, may ultimately depend on an expedient means of accessing the power of the court to cure settlement defaults:

…if the enforcement of the outcome cannot be guaranteed to the consumer, he will actually have to rely on the good will of the trader to comply or not with the outcome, which is largely illusory. The problem is that the recognition and enforcement of ODR outcomes faces many obstacles, and the complexity of these issues increases when it comes to cross-border contracts.

And this is more than a commercial trifle. The court’s enforcement powers are central to the rule of law and not easily replaced by user feedbacks, ratings or other self-execution mechanisms like escrow accounts, chargebacks or blockchain. The legal profession could seize on this important shortcoming to insist on regulatory safeguards and in doing so greatly enhance the domestic and international proliferation of ODR. The alternative is to retreat, cede market share and arguably compound the problem by complicating the enforcement process or alienating a significant part of the ODR user market that worries there are no teeth in the agreements reached online.

Some anticipate the end of lawyers’ monopoly: “services will be market-driven without any monopolized regulation…a person could ask their butcher to put together their legal claim and there would be no obstacle to doing so.” In this vision of the distant future, legal regulators will be brand ambassadors as opposed to a constraining influence on market participation: “the guarantee of competence grounded in training, a code of ethics, an insurance policy…what lawyers will have to sell in the future is a brand, and we should develop our regulations to reflect this.” Lawyers do offer more than a butcher but retreating from the access to justice problem by simply advertising a premium service is not only a missed opportunity to ensure expanded relevance in the conflict marketplace but also a lost chance to be a part of the solution.

6 Conclusion

Lawyers’ monopoly on legal services has exacerbated the access to justice crisis. ODR has emerged as a market alternative with the power to displace the legal profession. Lawyers must now decide how to respond: leverage the enforcement of settlement outcomes as basis for a future regulatory role or withdraw from the access to justice crisis and rebrand. There are compelling economic and moral reasons to pursue the former. The conflict marketplace is watching but not waiting: “access to justice: every major judicial figure in Canada is talking about it, yet nothing is being accomplished. The public will judge Law Societies on how they respond…and Law Societies have a corresponding obligation to quickly figure out a solution.”

Comments

  1. I found this a really thoughtful and provocative paper. I think you’re right that ODR tends to exclude lawyers and paralegals, and right that the legal profession has been way too conservative and protectionist. However I think many ODR participants really do need lawyers or paralegals, and they need them well before the time comes to enforce a settlement.

    I’m thinking in particular of Ontario’s Landlord Tenant Board, which has been transformed into a 99% online operation. (I know that ODR is usually thought of as a voluntary and private form of ADR, but your definition of ODR captures online public tribunals as well.) The LTB is a bit of a disaster nowadays — extensive delays, lots of people abandoning their rights.

    https://www.cbc.ca/news/canada/ottawa/ontario-landlord-tenant-board-wait-problems-collapse-1.6605631

    One of the problems is that tenants (who are almost always self-represented) cannot effectively access duty counsel given the way the platform is designed and the hearings are scheduled. So they go into hearings with little idea of their legal rights, and at serious risk of being railroaded.

    This blog post by Kathy Laird was really eye-opening for me: https://administrativejusticereform.ca/ontario-landlord-and-tenant-board-access-to-justice-threatened-in-the-rush-to-digitalization-guest-post-by-kathy-laird/

    Most people with serious legal interests at stake (e.g. housing, child support, human rights, immigration status) still need a trained, regulated, partisan advocate — lawyer or perhaps paralegal. They need advice and often they need representation, and they need it before they start trying to negotiate a resolution. I’m not sure whether or how ODR changes this basic reality.

    “Personal plight” legal services — in which clients are legally inexperienced individuals confronting dispute-related legal needs — still seem to demand the human touch. Is there some form of AI that can do what tenant duty counsel can do? These folks can let legally inexperienced, stressed out, possibly homeless people, with limited English, understand complex legal rights and options during a 5 or 10 minute consultation.

    The legal profession and its regulators need to give up the futile rearguard defence of doomed, anticompetitive positions — such as the exclusion of alternative business structures and paralegals, as identified by Mr. Rainsberry. Our energies would be better spent ensuring that the clients of today and tomorrow — including those in ODR — get the professional legal services they need to achieve a modicum of access to justice.