In a recent opinion piece in the Wall Street Journal, Clifford Winston and Robert W. Crandall, senior fellows at The Brookings Institution, question the notion that there is a surplus of lawyers in the United States and the need by some to put new limits on entry into the legal profession.
The authors contend:
“Many more people could offer various forms of legal services today at far lower prices if the American Bar Association (ABA) did not artificially restrict the number of lawyers through its accreditation of law schools—most states require individuals to graduate from such a school to take their bar exam—and by inducing states to bar legal services by non-lawyer owned entities.”
According to Winston and Crandall, these steps would “lower prices for clients and lead to more jobs” for lawyers. As an example of how increased competition reduces prices, they cite LegalZoom.com, which provides legal form documents such as patent applications and wills to people who might otherwise need to hire lawyers to prepare these relatively straightforward documents. LegalZoom, however, does not diminish demand for law firms and lawyers with the expertise to advise on complex, high-value matters.
Winston and Crandall, whose book (written with Vikram Maheshri), First Thing We Do, Let’s Deregulate All the Lawyers, was recently published by the Brookings Institution Press, advocate allowing accounting firms, investment banks, and other non-legal businesses to provide legal services. They believe this would “undoubtedly generate innovation” and lower costs in the legal industry, much as deregulation of wireless telephone services led to lower rates and new products for wireless users as new carriers entered the market. While the authors accede that they cannot predict all the effects of deregulation in the legal industry, they believe that not only will the deregulated services be more responsive to consumers, but that it will also create more jobs in the legal profession.
Other movements to deregulate the practice of law are also afoot in both the U.K. and the U.S. In the U.K., as a result of the passage of the Legal Services Act 2007, law firms will soon be permitted to raise external capital through alternative business structures. These alternative structures will allow the firms to sell all or part of their business to investors (e.g. through a private equity investment or an IPO). In the U.S., the American Bar Association Commission on Ethics 20/20 has recently circulated a proposal to allow non-lawyers to hold a minority interest in law firms. The proposed change would allow some alternative business structures, which are currently forbidden in every U.S. jurisdiction outside the District of Columbia, and permit partial non-lawyer ownership of law firms. The commission has not yet taken a position on the draft rule.
Posted by Marianne Purzycki