Perspectives on ABS

By Lee Akazaki February 19, 201519 February 2015

Dystopia or the saving grace for access to justice?

Perspectives on ABS

The CBA Legal Futures Initiative is presenting a panel discussion on alternative business structures at the Mid-Winter meeting of Council in Ottawa on Feb. 21. The Initiative’s 2014 report recommended that the Canadian legal profession move to liberalize its regulatory system to allow for non-lawyer-owned law firms – alternative business structures as a way to encourage the kind of innovation necessary to keep lawyers relevant.

Not everyone agrees, and in fact the current bencher election in Ontario is focused on candidates’ position on ABS, as the Law Society of Upper Canada studies what impact ABS would have on the delivery of legal services in the province.

The Futures Initiative has brought together a group of lawyers representing various facets of the debate to talk about what they think the impact would be. National Magazine asked each panellist to summarize his or her position in 100 words.

The CBA Legal Futures Initiative will be live-tweeting from what we hope will be a lively discussion on the topic. Audio and/or video of the event will later be made available on the CBAFutures.org website.


Lee Akazaki, former president of the Ontario Bar Association and candidate for LSUC Bencher

In Australia and Britain, ABS opened law to non-lawyer competition and firm ownership after the Bar lost self-regulation. ABS was a punishment for inept responses to consumer revolts over lawyers’ poor service, greed and ineffective discipline. The epicentre was a lucrative trade in accident victims’ personal data, sold in bulk to solicitors. ABS did not stem from the Bar’s failure to adapt commercially; rather, from over-commercialization.

ABS has created odd bedfellows for lawyers. Notably, U.K. insurers own firms and refer insureds to them, to profit from car crash claims and curtail settlements. Australia’s handful of equity-backed firms control the personal injury practice. ABS “innovation” has ignored family and criminal litigation.

Why should the CBA be seeking this dystopia?

Sheila Cameron, a family law practitioner in New Brunswick and member of the CBA’s Equal Justice Committee

Lawyers are cynical, critical and risk-adverse.  These traits make us great lawyers but poor business people.  Businesses constantly innovate to remain relevant; something lawyers have precious little time to think about while we spend our days dealing with our files.

The public no longer automatically consult with a lawyer when they have a legal problem.  In fact they try to avoid lawyers.  We need to change this reality, but it will only happen when we embrace non-lawyers as partners and investors in our law firms; people who will be a “breath of fresh air” to drive innovation to everyone’s benefit – even to the lawyers’.

Allan Fineblit, former law society CEO in Manitoba, member of the CBA Legal Futures Initiative

Alternate business structures should not be oversold or underestimated. They won’t bring our comfortable world to an end nor will they solve all the problems in that world. Alternative business structures alone are not a solution for all the access to legal services problems. They will not make us all rich beyond our wildest dreams. They do not herald the demise of ethics and professionalism. Alternative business structures simply create opportunities: opportunities to raise capital, opportunities to share profits, opportunities to move into new markets, opportunities to work in synergy with other businesses and opportunities for innovation.

Natalie McFarlane, legal entrepreneur in Toronto

The current economic reality of the legal service ecosystem is that governance is being diluted, in part by players in the realm of legal service delivery who are not members of a law society. With the dilution of professional self-determination and governance, the practice/professional of law risks becoming lawless. Market forces are calling the legal profession to get very clear about its value proposition to the public – the profession is being called to sculpt its relevance. Absent the creation of a resource-rich infrastructure to catalyze existing law practice structures that have scalable business models, it appears that a properly-designed ABS is the vehicle that can most efficiently and effectively enable innovations – innovations that are lawfully orchestrated by legal professionals and governed by legal regulators.

Preston Parsons, lawyer at a boutique employment law firm in Vancouver, member of the CBA-Young Lawyers executive

While unlikely to be the saving grace for access to justice, particularly overnight, it behooves the profession to (objectively) consider the ways in which Alternative Business Structures can add value to the delivery of legal services for Canadians. A made-in-Canada approach crafted using evidence from other jurisdictions may enable opportunities for further engagement with Canadians about the law, introduce streamlined ways to modernize legal practice and procedure, and perhaps even increase lawyer wellness by enabling more creative, flexible and innovative models of service delivery.

Filed Under:
Comments
Bradley Wright 2/20/2015 1:19:57 PM

ABS does not benefit the public. The Lord Chief Justice in England has called for an inquiry into why the trumpeted benefits have not occurred. Insides in the UK say that the only "benefit" is access to outside capital to fund increasing consolidations of ownership in the legal marketplace - a recipe for a harmed public interest. Currently, our charges to the Ontario public have to cover our overhead and our take-home pay. With an additional layer or two of profit-takers, the charges would have to cover our overhead, our take-home pay, the overhead of the plush head offices of our new corporate paymasters, and the returns on the investments of the non-lawyer venturers. That drives the costs to the public up, not down, but with all the profits going to the investors, not the lawyers. The investors have only reason for investing - to make money for themselves and their shareholders. There is no chance the investors will be as interested in the public interest of Ontarians as we lawyers are. They will not even be as interested in our own incomes as we are. By law, they will be interested in maximizing the returns to their shareholders. Further, there is no structure that will stand up over time to the pressures imposed by the investors to protect our ethos, an ethos the investors cannot, by law, share. Only in Dreamland can it be conceived that they will honour our ethos over time. Further, every benefit trumpeted for ABS can be achieved without it. Further, whenever giant corporate entities and taken major legal work away from lawyers, the costs to the public have risen and the standards have fallen and the risks have risen, covered by ever more costly and essentially useless insurance paid for by the badly served public. See the US title insurance industry as an example. That industry is accurately described by California as "dysfunctional" and by the SC of Iowa as "an invidious form of business". We should not want that here.

Adopting ABS is an irreversible step. When it proves to have been a disastrous blunder, it will impossible to reverse. I know of no ABS pushers who expect their incomes to go down. They do not mind if the incomes of lawyers in other practice areas go down, but they sure do not think theirs will go down. They expect to profit it, but it will be to the detriment of everybody else. Some pushers see themselves as management consultant gurus who will profit by advising firms and investors, the public interest be damned. Others, such as the law students, see it as a way of accessing capital instead of debt to start out. That is very myopic. At least with debt, someday you get rid of the debt. With equity, you never get rid of the co-owners or sole owners, and you remain beholden to them forever.

In Aus and the UK, pushers of ABS candidly admit for attribution that they see ABS as the means of achieving an incredible consolidation of ownership, and they happily admit that that is exactly what they are striving for.

ABS has been a disaster and will be an increasingly bad disaster, and a totally unnecessary one. One article in a Canadian magazine started off saying we need ABS, then went on to describe the wide-ranging new models of legal service delivery occurring in Ontario, such as the home-based cloud firm. It did not seem to occur to the reporter that all those innovations have occurred here without ABS.

Then they say that ABS will allow lawyers to income split with their spouses. That can only happen with legislative change and that will never happen. What government is going to stand up and say that they are giving tax breaks to the legal profession such that the rest of the public will have to make up the difference? Many ABS pushers will say anything rather than admit they made a mistake to have been duped by ABS in the first place.

Other pushers say that ABS will result in the employment of more lawyers. Nonsense. The non-lawyer corporate bean counters will dump as many lawyers as possible, replace them with high school graduates, and then pass along the zoomed up risks to the public in the form of sky-high insurance costs for coverage they rarely pay out on anyway. Again, see the rotten US title insurance example.

The only reason we are even looking at ABS is because we have an access to justice problem. Yes we do, but ABS will do nothing about it. The access to justice problem is overwhelmingly the result of the ruinous time and cost of litigation. The cost of conveyancing is not an access to justice problem. The cost of wills is not an access to justice problem. ABS would allow giant corporations to kill off small firm solicitors and then, having removed 10,000 competitors, the handful of corporations will then soak the public forevermore. ABS will militate strongly against reducing the time and cost of litigation - the one area that is a barrier - because the investors will want to see litigation continue to be a horrifically expensive proposition in order the increase their percentage returns.

The pushers also say that without ABS we will lose our right of self-regulation. Nonsense. ABS was brought into Aus and England only after self-regulation was taken from the profession. The government then further weakened the profession by allowing non-lawyers to own it. If we adopt ABS, the public will soon disbelieve that we are solely committed to our clients when we have multi-billion dollar profit-seeking corporate paymasters to answer to. The government will not believe us either, and at that point they will take self-regulation from us and turn it over to their beholden appointees. Anyone who wants that is not fit to be a bencher.

If we truly want to do something effective about access to justice and preserve our self-regulation, then we need to do two main things. One, at the pittance of $90 per member, we need to engage in a periodic ongoing public education initiative, and two, we need to put together a law society committee tasked with making effective recommendations to the government on how we can reduce the time and cost of litigation. Producing the recommendations should not take long as many people have been thinking about the issue for many years. The evidence strongly suggests that there are enough self-represented litigants and other unmet legal needs that, if we cut the time and therefore the cost of the average litigation file in half, there would be twice as many people who would seek legal assistance. Twice as many files at half the time and cost produces the same income for lawyers and a far, far, far, far better served public.

Those are the only truly effective ways to deal with the real access to justice barrier and to preserve our self-regulation. ABS is just a smoke-screen to avoid dealing with the real problems. To be willing, irreversibly, to sell our independence, and to bring about the anti-competitive cartelization of the legal profession, just because a few people want to make some money out of it at the expense of everybody else is nothing short of a repugnant disgrace.

There is nothing good about ABS, only bad, and if we adopt it here, then we are blithering idiots. No one who is interested in the public interest and in the untrammeled independence of the legal profession supports ABS, and no such person should vote for any bencher candidate who supports ABS. Do not even vote for the ones who are vacillating.

Anyone who would like to receive a very in-depth analysis of all this is welcome to email me at Bradley@wrightlawfirm.ca and I will send it to them.


Bradley Wright 2/20/2015 1:23:59 PM

Btw, it would have been better if the panelists the National, already on record as favouring the blunder of the century, had selected were more representative of the profession. The majority of practitioners are opposed, but you would have trouble realizing that from the article.



Leave message



 
 Security code