Is It Time To Deregulate the Practice of Law?

An editorial appeared in today's (08/22/2011) Wall St. Journal , titled "Time to Deregulate the Practice of Law", by Clifford Winston and Robert W. Crandell, both Fellows at the Brookings Institution. [ Ungated version here ]. The editorial argues that it is time for the legal profession to be deregulated, as other industries have been, in order to create price competition for legal services, spur innovation in the delivery of legal services, and reduce the premium that lawyers get for pricing their services as a result of strict occupational licensing. The editorial is a summary of the conclusions of a book soon to be published by the authors, and Vikram Maheshri, titled, "First Thing We Do, Let's Deregulate All the Lawyers" (2011, Brookings Press). This book is the opening salvo it what is sure to be an expanded debate about who should be allowed to provide legal services to the general public.

New Methods of Legal Service Delivery

With online companies such as LegalZoom, RocketLawyer, JustAnswer, LawBidding, Law Pivot and our own MyLawyer.com, pushing the boundaries of new ways to delivery of legal services,  there is renewed pressure on the organized bar to respond to consumer demand for affordable, transparent, competent, and reliable legal services. Law firms are exploring ways to delivery legal services online to compete with non-lawyer providers, but are often constrained by bar regulations.

Free White Paper: Virtual Law Practice; Success FactorsEssentially, the authors argue that lowering the barriers to entry into the legal profession would force lawyers to compete more intensely with each other, and  face competition from non-lawyers and firms not owned and managed by lawyers. The authors argue that legal fees are higher  because of occupational licensing and can be reduced by deregulation without sacrificing the quality of legal services.

Since heading the Philadelphia Institute for Paralegal Training, the nation's first paralegal school and the institution that pioneered the paralegal profession in the United States,  I have argued that you don't need a fully-trained and credentialed attorney to provide services to consumers for simpler, more routine legal problems, any more than you would need a brain surgeon to treat a headache, when a pharmacist will do. I am well aware of arguments that some lawyers make that there are no simple legal problems, but the reality is that many consumers will settle  for a "good enough" result, rather than spend thousands of dollars in legal fees.

On the other hand I am not comfortable with the idea that we should abandon all occupational licensing for legal professionals, lawyers and legal assistants, essentially converting the United States in a completely unregulated free market.

 

Arguments for a Regulated Legal Profession

1. The analogy between the legal profession to other deregulated industries, such as the airline industry, that the authors cite, is simply not relevant. There is fundamental differences between the manufacturing, mining, communication, transportation, and financial industries and the human service professions where the delivery of the service is expected to be of sufficient competence to accomplish the task at hand. If you follow the author's logic, we should also deregulate the dentists, the teachers, the nurses, the social workers, and the doctors because it results in lower pricing and therefore would increase the availability of those services. e.g., Instead of going to a "Dentist" to get your root canal work, you would have the option of going to the "Tooth Fairy."

2. The authors assume that the quality of legal services would not deteriorate any more than when the planes didn't stop flying when the airline industry was deregulated. Unfortunately the authors have no facts to back up this assertion. It is just wishful thinking.

3. When you look at the facts, however,  a more thoughtful response to reforming the delivery system for legal services is required.

On the anecdotal level, I can testify to the literally hundreds of botched legal matters that I have reviewed generated by "Immigration Specialists", Legal Technicians" and other non-lawyers operating in the grey area of offering document preparation services. In some instances, I have seen immigrants actually deported because of improperly prepared papers by "Immigration Specialists." I have reviewed "failure to discharge notices"  issued by U.S. Bankruptcy Court because of improperly prepared bankruptcy petitions. I have reviewed dozens of divorce petitions filed by "pro-se" parties, assisted by online document preparation companies that were rejected by the courts. I have seen enough of these cases to know that in many of these situations  incompetence and lack of knowledge and skill is evident. In some cases there is outright fraud and misrepresentation.

4. There have been almost no empirical studies that I know of that support the argument of the authors that the quality of legal services would not deteriorate in a completely deregulated marketplace - save one- and that study does not support the author's conclusions.

Legal Services Consumer Panel Study

Very recently the Legal Services Consumer Panel of the Legal Services Board in the United Kingdom, the agency in charge of deregulating the legal profession in the United Kingdom, conducted an empirical study of the quality of wills prepared by both solicitors and non-lawyers.

 

The Panel concluded that on the issue of quality:

 "one in four wills in the shadow shops were failed with more than one in three of all assessments scoring either poor or very poor. The same proportion of wills prepared by solicitors and will-writing companies were failed. Wills were almost just as likely to fail when the client had simple or complex circumstances. Key problems where the will was not legally valid or did not meet the client's stated requirements, were: inadequate treatment of the client's needs; the client's requests not being met; potentially illegal actions; inconsistent or contradictory language; insufficient detail; and poor presentation. Key problems relating to poor advice include: cutting and pasting of precedents; unnecessary complexity; and use of outdated terminology."

The United Kingdom has a legal market which is not only more deregulated that the US market, but will become even more deregulated in the future. Despite this more open environment, the Panel concluded that:

"Inherent features of will-writing services place consumers at risk of detriment. Consumers lack the knowledge to identify technical problems or assess whether the additional services offered are necessary or represent good value for money. The reliance on extracting good information about the consumer‟s circumstances and preferences, combined with the range of possible ways to deal with these in the will, means there is potentially wide scope to give bad advice."

and

"However, there is a need to make consumers better aware of the suitability of online services as these received the highest proportion of fail marks in the shadow shopping, but wills sold over the internet are difficult to regulate."

Thus, the Panel proposes that:

"will-writing services should be made a reserved legal activity. Any business – not just a solicitors firm – satisfying an approved regulator‟s entry standards could provide will-writing services."

The UK approach is not to restrict will-writing just to lawyers, but to open up the system to any providers that can satisfy the educational, regulatory, and accountability standards within the reserved activity. This is a vastly different approach than eliminating standards all together, as the authors seem to suggest.

The compete UK Report on Regulating Will Writing can be downloaded here. See also our Resource Page on Regulation of the Legal Profession.  The Report is worth reading by any policy maker who is thinking about doing away with all regulation of the providers of legal services to the general public.

Some final thoughts:

The authors claims of the benefits of deregulation in general are not supported by current evidence.

Consider:

  • Deregulation of the mortgage baking industry brought the American economy to its knees;
  • Deregulation of the US banking industry has wreaked havoc on the world's economy;
  • Lack of strong regulation of the proprietary higher education industry has resulted in thousands of graduates without an adequate education, low employment rates, and high default rates. (Of course, as the author's point out, you could say the same about law schools and law school graduates, but then again the accreditation of law schools by the American Bar Association, it can be argued is another example of an "unregulated activity" without substantive standards that are meaningful).

The list can go on.

Perhaps I am premature in my judgment as the book has not been released, and I have just reviewed the salient conclusions. I can't wait to give it a full read and review.