Sunday, February 7, 2021

Arizona Supreme Court opens door to non-lawyer ownership of law firms

 


The Arizona Supreme Court - effective January 1 - has authorized non-lawyer ownership of law firms and other "Alternative Business Structures" including licensed paraprofessionals who can complete forms and represent clients.

The ABA Journal reports that Arizona Vice Chief Justice played a key role with David Byers of the state Administrative Office of the Courts in examining how legal services are delivered.  The task force of the Arizona Supreme Court reported in October 2019:  It recommended that the Court

Eliminate Arizona’s ERs 5.4 and 5.7 and amend ERs 1.0 through 5.3 to remove the explicit barrier to lawyers and nonlawyers co-owning businesses that engage in the practice of law while preserving the dual goals of ensuring the professional independence of lawyers and protecting the public.


Arizona Rule of Professional Conduct 5.4,  - now abrogated - barred nonlawyers from having an economic interest in a law firm or participating in attorney fee-sharing. The task force recommended its elimination and proposed a new "alternative business structure" in which non-lawyers could provide some legal services, even going to court.

“The legal profession cannot continue to pretend that lawyers operate in a vacuum, surrounded and aided only by other lawyers, or that lawyers practice law in a hierarchy in which only lawyers should be owners,” the task force wrote. “Nonlawyers are instrumental in helping lawyers deliver legal services, and they bring valuable skills to the table.”

The Arizona Code of Administration recognizes in Section 2-708 a category called "legal document preparers" who are defined as a person or business entity which is

certified pursuant to this section to prepare or provide legal documents, without the supervision of an attorney, for an entity or a member of the public who is engaging in self representation in any legal matter. An individual or business entity whose assistance consists merely of secretarial or receptionist services is not a legal document preparer.

Also licensed are "legal paraprofessionals" who have been trained and licensed.  They can

Prepare and sign legal documents; b. Provide specific advice, opinions, or recommendations about possible legal rights, remedies, defenses, options, or strategies; c. Draft and file documents, including initiating and responding to actions, related motions, discovery, interim and final orders, and modification of orders, and arrange for service of legal documents; d. Appear before a court or tribunal on behalf of a party, including mediation, arbitration, and settlement conferences where not prohibited by the rules and procedures of the forum; and e. Negotiate legal rights or responsibilities for a specific person or entity.

But the most dramatic development is the Court's decision to allow non-lawyer ownership of law firms.  The story is told in the definitions in Section 7-209:

A. Definitions.

“Alternative business structure” (“ABS”) is a business entity that includes nonlawyers who have an economic interest or decision-making authority in the firm and provides legal services in accord with Supreme Court Rules 31 and 31.1(c).

“Authorized person” means a person possessing:

1. An economic interest in the alternative business structure equal to or more than 10 percent of all economic interests in the alternative business structure; or 2. The legal right to exercise decision-making authority on behalf of the alternative business structure. Examples may include: a sole proprietor of a sole proprietorship, a manager of a limited liability company, an officer of a corporation, a general partner of a general or limited partnership, or a person possessing comparable rights by operation of law or by agreement.

 

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