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ABS report: Majority non-lawyer ownership off the table

|Written By Neil Etienne

The debate over alternative business structures may not be over, but for now a working group created to investigate the issue is recommending that non-licensee majority ownership “should not be further examined at this time.”

‘We would like to see them take it further and look back into majority share,’ says Nathalie Picard.

“There may be a time soon when better material information will become available, but for now we don’t think we should proceed with looking at majority share,” Malcolm Mercer, co-chairman of the Law Society of Upper Canada’s working group on alternative business structures, told Convocation on Thursday.

While recommending against majority-share non-lawyer ownership, the report from the working group suggests “that more limited non-licensee ownership models for traditional law firms merit further study and that there are certain, tailored ABS models which should be considered in depth.”

Charles Gluckstein, a former president of the Ontario Trial Lawyers Association, says it’s the ideal decision for the time being.

“We’re very satisfied. We analyzed the ABS models in the U.K. and Australia and we found nothing supportive that would lead to improved access to justice,” he says.

“As we move forward, we would certainly be open to investigation of other models. Let’s see what other jurisdictions may do in the future because while the ABS system doesn’t seem to address everything it is supposed to do right now, it doesn’t mean in the future there might not be other models that do.”

The law society formed the working group in 2012 to study business structures and law firm financing options, much like those adopted in Australia and Britain in recent years. The working group’s report this month to Convocation stated that while “generally permitting non-licensee majority ownership or control of traditional law firms should not be further examined at this time, the working group considers it appropriate to explore and assess a subset of ABS models which might be applicable in Ontario.”

While many lawyers are welcoming the recommendation against majority ownership by non-lawyers, others expressed disappointment.

“Lawyers like to think a certain way, we are trained a certain way, we have certain baggage so to speak in that a lot of traditional lawyers don’t necessarily like to see change,” says Nathalie Picard, owner of ALT Divorce in Ottawa and a self-described proponent of alternative business structures.

“It would be of great benefit to have the views of other professions to give new perspective,” she adds.

“It’s healthier for clients; it’s a holistic approach.”

Picard says that particularly for family law, a majority-share approach to alternative business structures would allow law firms like hers to offer a one-stop shop of services by professionals such as social workers, psychiatrists, and accountants to help clients with more than just the base legal assistance they need.

But Gluckstein says he and other personal injury lawyers worried a majority-share option would make Ontario firms too “focused on profit” rather than on access to legal services.

“We would argue at this point the main motivators for ABS, like access, better technology, are not improved enough in the models being used already. We believe that these solutions are already amongst us,” he says, adding options such as flat fees for legal services can help improve access to legal services while corporate partnerships can help firms improve their technology.

“Firms are already innovating, and we’ve found nothing supportive so far that ABS furthers this cause.”

While disappointed overall, Picard says she’s happy the working group is open to some degree of non-lawyer ownership of law firms.

“I’m happy they’re willing to look at minority-share private ownership; it’s a start,” she says.

“But we need to embrace change. We would like to see them take it further and look back into majority share. Unfortunately, it’s a minority of lawyers that support this [majority non-lawyer ownership], but we see it as an opportunity for different professions to work together to provide the best possible service for the client and to make it more affordable.”

But at Convocation last week, Bradley Wright said that while he was happy the idea of majority ownership for non-lawyers was off the table, he’d like to see the working group go further. “Retreat from majority share is a step in the right direction but it doesn’t go far enough,” he said.

“ABS is not the way to go, and we should reconstitute this working group to look at effective alternatives to access.”

The working group studied four potential models for alternative business structures in its report. The first model would be for entities providing legal services in which individuals or entities not licensed by the law society could have up to 49-per-cent ownership while the second would have no limitations on outside ownership for those not licensed by the LSUC.

The third model would allow for business entities providing both legal and non-legal services — except those identified as posing a regulatory risk — in which individuals and entities not licensed by the society could have up to 49-per-cent ownership. The fourth option would allow for business entities providing both legal and non-legal services — except those identified as posing a regulatory risk — in which individuals or entities not licensed by the law society could have unlimited ownership.

“Based on its work to date, the working group does not propose to further examine any majority or controlling non-licensee ownership models for traditional law firms in Ontario,” the report states.

“Such non-licensee ownership levels do not appear to be warranted based on current information when the potential benefits to such external ownership levels are weighted against the regulatory risks and regulatory proportionality. However, the working group will continue its mandate by exploring and assessing other potential ABS options.”   

For more, see "Heated debate on alternative structures," "Why is personal injury bar so against ABS?" and "Balance struck on ABS."

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