Articles Posted in How Legal “Ethics” Rules Protect Lawyers’ Competitive Turf

THE POINT

In February of this year the American Bar Association took action that illustrates how attorneys’ views of their “ethics” rules can have the effect of shutting down innovation in the delivery of legal services, thereby protecting their incomes from unwanted competition.

DISCUSSION

It’s impossible to prove what someone has intended by an act on their part.

But the ABA’s February action had the effect of protecting their lawyer-members from unwelcome competition by shutting down consideration of changes in the “ethics” rules proposed for consideration by the ABA Center for Innovation and four of the ABA’s standing committees.

In February, the American Bar Association, acting through its House of Delegates, considered an ambitious proposal of its ABA Center for Innovation and four standing committees relating to innovation in the delivery of legal services. Here “innovation” meant opening doors to possibly better and cheaper ways to serve clients.

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THE POINT

It’s been governors and other government executives who’ve responded to COVID-19 — over protests from physicians and their medical societies — by removing the red tape of doctors’ protectionist rules to speed healthcare to those who urgently need it.

DISCUSSION

In the midst of a pandemic, we need physicians’ medical knowledge and clinical skills to get the best care to those infected or at risk of being infected. But we don’t need their insular, self-interested approaches to the way such medical knowledge and clinical skills are delivered to those who need them.

It’s worth noting that important parts of the red tape impeding health care responses to COVID-19 were created — and defended by — the medical profession and institutions promoting its interests.

And it took people outside of the medical profession — specifically, governors and other officials focused on the larger picture (i.e., public health) — to get us past those barriers that organized medicine had placed in the way of those results:

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THE POINT

Wall Street Journal, Saturday / Sunday, April 11-12, 2020, commenting on New York State’s response to COVID-19’s demands on its healthcare system:

” … New York’s biggest force multiplier has been regulatory relief.”

DISCUSSION

I invite your attention to my recent series: “‘Ethics’ Rules Shape the Legal Services Market: To Protect Clients? Or to Protect Lawyers from Unwanted Competition?” (here, here, here, here, and here).

As a practicing business lawyer — with a 12-year hiatus during which I was a general manager and executive (i.e., not practicing law) at Whirlpool and then GE — I concluded a long time ago that legal-services-market “ethics” rules have little to do with protecting clients, and a lot to do with protecting lawyers from unwanted competition.   

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Last Saturday (April 11, 2020) the Wall Street Journal (subscription required) featured the following editorial: “Doctors Without State Borders: Governors are easing rules on caregivers , and it’s long overdue”.

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THE POINT

1. Bar authorities and courts too often take extreme, over-literal views of the professional “ethics” rules that shape the legal services market.

2. Unsurprisingly, their interpretations frequently just protect attorneys from unwanted competition — not protecting clients from fraud or abuse.

DISCUSSION

As a lawyer, I take a strict, traditionalist view of legal “ethics” rules that truly pertain to honesty: Don’t lie to a judge, never allow yourself to be in a conflict with your client’s interest, etc.

And on eight or nine occasions I have withdrawn from representing a client where I believed that following their wishes would have the effect of making a misrepresentation to a counter-party in a deal, to a government official, or to a court (and where the client refused to make a disclosure I proposed to restore honesty to the situation).

But I believe that most of the “ethics” rules shaping the legal services market are little or no use in guarding clients from harm. Instead, they mostly protect lawyers from unwanted competition:

• Part 2 — U.S. lawyers can’t practice law as part of an accounting firm.
• Part 3 — Where an app connects you to a company that retains a lawyer for your traffic ticket case, and also puts a ceiling on the fine you have to pay, the app company violates legal “ethics” by “practicing law”.
• Part 4 — If a client chooses an attorney after finding them on a client / lawyer matching service, the web listing is “referring” the lawyer to the client — even though it’s the client who selects the lawyer.

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Each of the offerings prohibited in the above cases meets a legal need:

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THE POINT

1. LegalMatch.com is a legitimate, constructive solution to a legal need faced by the public that the legal profession seeks to shut down on “ethical” grounds”.

2. Legal “ethics” should be a shield to protect clients from fraud or abuse, not a sword for the legal profession to attack unwanted competitors.

DISCUSSION

Let’s say that you find yourself in need of a lawyer. And that you don’t know of any attorneys in your geographic area who are experts in the field you’re concerned with.

According to the California appellate court, whose ruling against LegalMatch.com the California Supreme Court summarily upheld (i.e., without an opinion) on March 11, 2020, this was how LegalMatch.com worked:

• “LegalMatch sends information to lawyers based solely on the client’s selection of geographic location and area of expertise.”
• “After the lawyers receive this information, each lawyer has the opportunity to affirmatively reach out to the individual [would-be client].
• “Depending on the client’s preferences, the potential client may choose to send contact information to the lawyers so that they may continue their discussion outside of the platform.”
• “Lawyers and clients negotiate between themselves to determine the parameters of their attorney-client relationship.”
• “Each lawyer who purchases a subscription is slotted into a geographical location and category of legal expertise.”
• “The number of lawyers in a geographic location and category of legal expertise is limited by an algorithm (allocation system) that maintains LegalMatch’s profitability by balancing the number of clients and lawyers available.”
• “Potential clients may use the site for free.”
• “LegalMatch receives no fee for the successful formation of an attorney-client relationship.”

This, in other words, was nothing more than a lawyer-client matching service. Nevertheless, this court held that LegalMatch.com amounted to an illegal lawyer “referral” service.

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THE POINT

1. TIKD was a legitimate, constructive solution to a legal need faced by the public that the legal profession seeks to shut down on “ethical” grounds.

2. Legal “ethics” should be a shield to protect clients from fraud or abuse, not a sword for the legal profession to attack unwanted competitors.

DISCUSSION

Let’s say you were driving in Miami (or elsewhere in South Florida, or Tampa metro area, or Washington, D.C., or specified counties in Maryland or California), and a police officer gave you a ticket for speeding.

Say it was for $200.

Until legal action by the Florida Bar and a traffic ticket lawyer forced it to suspend operations, a Coral Gables, Florida company called TIKD would offer you the following:

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THE POINT

1. Unlike countries in Europe and Asia, Big 4 accounting firms are prohibited from offering corporate legal services in the U.S.

2. Through its rule-making state bar authorities (made up of lawyers), the U.S. legal profession is fighting tooth-and-nail to keep it this way.

DISCUSSION

U.S. law firms tout their prowess as legal powerhouses that a serious business cannot safely do without. In quiet conversations with in-house counsels and P&L executives alike, attorneys from these firms unsubtly invoke the fear-and-dependency that an earlier generation expressed this way:

“Nobody was ever fired for hiring IBM.”

For attorneys who sell their services this way, the last thing they want is competition from the likes of EY, PwC, Deloitte, and KPMG for substantial corporate legal work. 

That (along with other aspects of legal market structure) is what’s at stake in the following, arcane-sounding, legal “ethics” prohibition:

“A lawyer or law firm shall not share legal fees with a nonlawyer”.*

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Big 4 accounting firms have been practicing law outside the United States for a couple of decades.

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THE POINT

1. “Ethics” rules are the main determinant of how the legal market is structured: Who can do what? With whom? What is “practicing law”?

2. After decades of practicing business law, I believe that “ethics” rules structuring the market for legal services are largely about protecting lawyers from unwanted competition.

DISCUSSION

The legal profession decides who can do what in solving businesses’ legal problems.

They decide the circumstances in which lawyers may — and may not — work with people whom lawyers call “nonlawyers”. And they decide if solving a particular type of legal problem amounts to “practicing law” — something that only a licensed attorney is allowed to do.

The legal profession makes these decisions through state bar authorities that adopt rules of professional “ethics”.

Those state bar authorities are made up of … well … lawyers.

In the United States, attorneys set for themselves the competitive boundaries of markets in which they can sell their services — and in which they use the force of law to forbid others to compete with them.   Continue reading