The Business of Law is Open for Business
This article was published in the Winter 2020 issue
by Rick Hoffman, Member, Office of Legal Services Innovation
Over the past year, Utah has found itself in the extraordinary position of leading the country in using regulatory reform of the legal profession to increase access to justice and innovation in the legal service market. Through the creation of the Office of Legal Services Innovation and the legal Sandbox, the Utah Supreme Court has taken one of the most significant steps toward loosening the excessive restrictions on the business and practice of law to foster opportunity and innovation across the sector.
The Court’s regulatory reform project has a simple goal. Increase the ability of more Utahns’ to access quality legal help, when, where, and how they want it, by increasing the diversity, affordability, and competitiveness of the legal services market. We know that the rules governing the practice of law have created a dysfunctional legal market in which the supply of legal providers is too expensive and too small to meet the overwhelming demand of people with legal needs. Beyond that, we know the rules have set into stone an outdated service model, one that does not meet consumers where they are today, particularly when one considers the service opportunities offered by technology.
Because the access to justice problem is a systemic problem, the Utah Supreme Court focused on the major mechanisms restricting the legal services market: the rules restricting who can own or invest in law practices and the rules restricting anyone other than lawyers from offering legal advice and assistance. Loosening those restrictions, allowing more sources of capital, more efficient business models, partnerships across professions and with businesspeople, allowing less costly and scalable service providers, is a necessary step toward solving the access to justice crisis.
The Court eased these restrictions but required all new service providers to apply for authorization through the legal Sandbox, a controlled environment in which new businesses and services may operate under the oversight of the Court through the Office of Legal Services Innovation (“Innovation Office”). Entities using nontraditional legal business models (e.g., lawyers doing business with nonlawyers, nonlawyers investing in legal practices, or nonlawyer-owned legal businesses) or offering nontraditional legal services (e.g., nonlawyer or software legal practitioners) are the kinds of entities that must be authorized through the Sandbox to offer legal services in Utah.
The Sandbox is operated by the Innovation Office, an office of the Utah Supreme Court made up of members appointed by the Court. The Office assesses applicants based on the potential risk of consumer harm, focusing on the risks of poor quality and potential upselling of unnecessary services. The Office assigns applicants into risk categories (low - moderate - high) and then recommends the applicants to the Utah Supreme Court. The Court retains the final discretion on whether an entity is authorized to practice law within the Sandbox.
The Sandbox offers an opportunity unprecedented in the United States. For the first time, the business of law is open for business to all. Back of the envelope calculations indicate the latent market for legal services could be enormous. Studies have determined, unsurprisingly, that the largest barrier to consumers of all income levels regarding their purchase of legal services is the expense that is involved. As a result, each year there are many instances in Utah when people and firms simply go without professional legal help. For example, nearly all Utah debt collection cases, roughly half of the divorces in Utah, countless foreclosure actions, etc., have no professional legal help for at least one party. Arizona and California are in the process of exploring their own idea of how to reach these underserved markets. In other words, there is a lot of under-served market demand in Utah alone and it seems likely the opportunity throughout the country is enormous.
Potential models include multidisciplinary practices in which lawyers partner with other professionals to offer holistic professional services to clients, lawyers work as employees for ancillary service providers (a lawyer employee of a bank offering legal advice and service alongside banking services, for example), venture capital powered technology services focusing on the latent small business and consumer legal services market, and so on. How might we reach the enormous potential latent market for legal services? Utah offers the first real chance for entrepreneurs and funders to find out.
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*Read the latest issue of Silicon Slopes Magazine, Winter 2020