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Some Alternative Business Structures approved

|Written By Alex Robinson
Some Alternative Business Structures approved
Brian Cameron says introducing ABS initiatives is ‘the first step’ in a slippery slope to allowing non-lawyer ownership of law firms. Photo: Robin Kuniski

Some personal injury lawyers are concerned that new Alternative Business Structure initiatives approved by the Law Society of Upper Canada are the beginning of a slippery slope toward non-lawyer ownership of law firms.

LSUC benchers approved a motion at their September meeting to allow non-profits and charities to provide legal services through practitioners.

The changes will allow non-profits and charities to employ lawyers to provide legal services directly to clients rather than referring them out.

Some lawyers, however, see the proposal as a politically astute move to bring ABS to Ontario.

“It’s just simply the first step and, two years down the road, we’re going to have full non-lawyer ownership of law firms. That’s where this is headed,” says Brian Cameron, a partner with Oatley Vigmond Personal Injury Lawyers LLP in Barrie, Ont.

The law society’s Alternative Business Structures Working Group has been looking at the issue since 2012. The group shelved a proposal to allow non-lawyer majority ownership of law firms in 2015, but some lawyers are still wary of introducing any form of ABS.

“I’m not a fan of the ABS model at all. I really think it’s a slippery slope,” says Renée Vinett, a partner with Howie Sacks & Henry.

“It just raises alarm bells.”

Bencher Malcolm Mercer, who is chairman of the working group, has said these changes will allow non-profits and charities, such as women’s shelters, to connect people to the services they need rather than requiring them to seek out lawyers, he says.

“What I would say to those who take the position that one shouldn’t do a good thing because it might lead to a bad thing is that they should analyze each proposal on its own merits,” he says.

“It would be a shame if the profession, if it was concerned about non-lawyer ownership, would not permit charities and not-for-profits to serve needs that we all know exist.”

The working group had originally planned to submit proposals to Convocation for a vote in June, but that motion was scuttled the night before the meeting after there were calls that not enough consultation had taken place. A number of organizations, such as the Ontario Trial Lawyers Association and the Federation of Ontario Law Associations, quickly submitted letters asking that the motion be deferred until they had a chance to provide further input over the proposals. As a result, trade unions and member-based organizations, which were originally included in the initiative, were taken out of the motion.

There were also a number of caveats included to alleviate some concerns raised by the OTLA. One such concern was that relationships between charities and law firms could create exclusive brokerage arrangements that could manipulate prospective clients into selecting the firm in the partnership to represent them. Under the new motion, non-profits and charities will not be allowed to charge clients for legal services, but they will not be able to refer clients to lawyers or paralegals in exchange for donations or payments.

Claire Wilkinson, the president of OTLA, says the organization was pleased to have the opportunity to work with the law society on the proposals.

“We certainly want to see greater access to justice for those in need, and this model could help with that laudable goal,” she says. The new motion also excluded organizations that are funded by Legal Aid Ontario, after some benchers raised concerns about legal aid clinics.   

  • LSUC's Approval of ABSs Will Hasten the End of the General Practitioner

    Ken Chasse
    The consequences of LSUC's approving any form of "alternative business structures" (ABSs) have to be evaluated within the present context that: (1) LSUC is not itself trying to solve the massive "unaffordable legal services problem," which is causing great damage and misery to the majority of Canada's population, to the courts clogged with litigants without lawyers, and to the legal profession itself. LSUC's responses to the problem merely help the population learn to LIVE WITH the population, but not to solve the problem. The former is easy; the latter is difficult, and therefore is being avoided by law societies. But only a law society has the ability and duty in law to solve the problem--see section 4.2 of Ontario's Law Society Act. And (2), LSUC's approval of the "charity ABSs" because allegedly, they can bring some relief to the problem, is but one step down a slippery slope that will inevitably end with the approval of all forms of ABSs. That is because there are potentially $$millions to be gained in legal fees as a consequence of such approval, by those law firms who will represent such ABS investors wanting to invest in law firms. The purpose of such investors is not to relieve the problem's victims, but rather to corner the market on routine legal services. The problem is a social welfare problem, but such investors are not in the social welfare business. They want return on investment where the "quick and easy money is." It doesn't exist in trying to solve the problem of unaffordable legal advice services--legal services that are more than merely routine legal services' paper work, and therefore not yet vulnerable to automation's dispensing with lawyers and to "easy money" investors. Particularly serious are these consequences: (1) A law society's approval of ABSs facilitates the ability of the large, very well financed commercial producers of legal services, (such as, LegalZoom, LegalX, and Rocket Lawyer), to claim that they too should be allowed to bring some relief to the problem's victims, especially so when the law society itself is not trying to solve the problem. That claim will provide them with a strong defence against any law society prosecutions for, "the unauthorized practice of law." The target of such commercial producers is the market of general practitioners--such lawyers are more than half the membership of a law society. The commercial producers have had great success in eating into that lawyer's market in the U.S. And they have begun to doing so in Canada. Therefore, they are a large threat to the legal profession--not only to the general practitioner, but to any type of routine legal service that can be automated, including the standard documentation used by large corporate-commercial law firms, and to the routine incorporation and related services that they provide. And therefore their success should not be aided or in any way facilitated by law society approval (legalization) of investors owning law firms, which is what ABSs represent--the conversion of law firms into investment properties. Mine is not an argument of unjustifiable protectionism. It is one to make available the substantial benefits of the lawyer-client relationship. But it is an argument that has no strength as long as legal services as provided by lawyers remain unaffordable. (2) There is also this strong and questionable motivation: those law firms whose clients can be those investors, will earn $$millions in legal fees by representing those investors in negotiations with hundreds of law firms as to such investments in those law firms. ABSs are being strenuously promoted at this time when, because of the problem of unaffordable legal services, there are many very financially-stressed law firms, very short of clients. That raises an issue as to a potential conflict of interest concerning those law society benchers (lawyer-managers) whose law firms have such investor-clients or can obtain them. The ABS issue is not entirely one of impeccably pure, charity-motivated service in the public interest. Rather, because of the $$millions at stake, any form of ABS-approval will make the ABS issue a live one in the deliberations of every law society in Canada. As due diligence requires in such circumstances, "follow the money." See this article (posted on the SSRN for free pdf. download): "Alternative Business Structures’ 'Charity Step' to Ending the General Practitioner", at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3020489 - Ken Chasse, Lawyer, member, LSUC, and LSBC, Canada.

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