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Lawyers question prof’s critical findings on ABS

|Written By Yamri Taddese

While a new study commissioned by the Ontario Trial Lawyers Association has poured cold water on the outcomes of alternative business structures in Britain and Australia, critics say the report’s narrow criteria for measuring the results misses other potential benefits of new ways of offering legal services.

The research so far offers little to suggest alternative business structures improve access to justice, says Jasminka Kalajdzic.

The findings of the study, conducted by University of Windsor Faculty of Law Prof. Jasminka Kalajdzic, are consistent with the association’s position that there’s a dearth of evidence to suggest non-lawyer ownership of law firms “directly or indirectly” leads to improvements in access to justice.

“While it is true that some ABS like Slater & Gordon [in Australia] have been successful in branding, using innovative technologies, achieving economies of scale, and increasing the number of personal injury claims, there is no data documenting a decrease in the cost of legal services or the rate of self-representation,” wrote Kalajdzic in the study released by the association last week.

“Furthermore, there is no evidence of a significant impact on areas of civil justice needs that are currently most acute in Ontario.”

But Jordan Furlong, principal of consulting firm Edge International, says the legal profession has to decide what its goal is in considering alternative business structures.

The obvious one, of course, is increased access to justice. But according to Furlong, it’s possible to define access to justice in ways other than just lower legal fees. “Accessibility does not only mean affordability,” he says.

“It’s a big part of it, no question, but accessibility is also about not just how much does this cost but where can I find it and how easily is it explained to me. The convenience of finding your legal services where you’re already going anyway to do some shopping is, I think, a reasonable aspect of access.”

Kalajdzic tells Law Times her study looked at literature that’s already available and she didn’t conduct her own research on the efficacy of alternative business structures in addressing access to justice.

One of the main gaps she found was the fact that the major areas of unmet legal needs in Canada are in family and criminal law, fields the research suggests law firms owned by non-lawyers have been slow to enter.

Her report cited other research showing 70 per cent of family law litigants go without counsel because they can’t afford a lawyer but it noted that when it comes to the alternative business structures in Britain and Australia, law firms have largely focused on personal injury matters rather than family law.

“According to [publicly traded law firm] Slater & Gordon’s 2014 Annual Report, over 80 per cent of its total revenue (in both the U.K. and Australia) is derived from personal injury work,” wrote Kalajdzic, with the remaining areas covering family, conveyancing, and wills and estates matters.

Kalajdzic also found that while there’s evidence of technological advances at firms like Slater and Gordon, there was no causal link between those improvements and non-lawyer ownership.

“The evidence of a connection between technological innovation and acquisition and [non-lawyer ownership] is there,” she says.

“I don’t know if it’s a causal connection, [meaning] they have more access to capital and they can spend money, or whether it’s just a different culture, a more corporate-oriented culture.”

Kalajdzic also cautions against heavy reliance on technology as it can “at best be described as providing limited improvements to access to justice.”

Some proponents of alternative business structures were quick to discredit the study, calling it biased fodder for the association’s position.

“It appears very much to be typical of paid reports where the client has already decided that ABS is bad and requires some reasons to support that already-entrenched position,” says Toronto lawyer Mitch Kowalski, who has been an ardent voice in favour of alternative business structures.

He adds: “It’s hard to take a report seriously when it notes Slaters’ technological advances — then dismisses those advances by saying that the same can arise in Ontario — but without providing any reason they have not yet occurred on the same scale. She [Kalajdzic] ignores the fact that technology is not inexpensive and requires capital, which is not available in the current model. The noting of a cultural difference between the Australian and the U.K. legal professions vis-a-vis ours as a rationale for not allowing ABS in Ontario is also grossly overstated.”

Lawyers such as Furlong, meanwhile, are calling for a broader debate around alternative business structures as the dialogue to date has narrowly focused on non-lawyers owning law firms. When Ontario adopted the term alternative business structures, it also imported some assumptions, says Furlong.

“That’s not the only question,” he says, noting the conversation so far has missed issues such as exploring other ways of doing things by, for example, making room for other professionals in the delivery of legal services.

If other professionals are to participate in the industry, the profession should talk about how to regulate them, he suggests.

“I don’t love the importation of the ABS terms because we’re narrowing the whole discussion to the very, very narrow question of can non-lawyers be allowed to own law firms,” says Furlong.

“Then everybody starts to talk about Walmart . . . and the whole conversation goes off the rails.”

Furlong also says that while there isn’t a whole lot of evidence to suggest alternative business structures increase access to justice, it’s hard to say that link will never emerge.

“It’s not enough to say let’s shut the experiment down,” he says.

According to Furlong, the legal profession also needs to decide whether access to justice is the only result it’s seeking from the implementation of alternative business structures. If lawyers are able to bring other professionals such as accountants or architects into their partnerships or take investment capital from a hedge fund, that’s not something with obvious benefits for access to justice, he notes.

“But what it’s really about is it’s helping me become a more competitive, powerful law firm.”

Last week, a report to Convocation by the Law Society of Upper Canada’s alternative business structures working group included some information that adds to the debate over areas such as the potential impact of alternative business structures on family law and access to justice.

The report noted, for example, that from 2011-14, there was a significant increase in the percentage of family law services offered at a fixed fee in England and Wales.

The percentage increased to 45 per cent last year from 12 per cent in 2011, according to the report.

  • Ken Chasse
    Because they will use the present method of delivering legal services, ABS proposals can't solve the unaffordable legal services problem. That is the "handcraftsman's method" which does not use outside specialized support services. All other fields of the competitive production of goods &services have long ago moved to a "support services" method. Because Canada's law societies have not sponsored the necessary support services, the unaffordable legal services problem is inevitable. Law firms are too small and not sufficiently specialized to produce the economies-of-scale 2keep prices affordable. Practice groups are little law firms. But LAO LAW, at Legal Aid Ontario, in its 9th year produced 5,000+ legal opinions per year for Ontario's legal aid lawyers. THAT's a true specialized support service that substantially lowers the cost of legal advice services. CanLII should provide the same service, at cost, to all lawyers. See my A2J articles (pdf)
    http://ssrn.com/author=1398484
  • Ken H
    Unfortunately the practice of law is already more of a business than a profession. Advancing ABS where investors are pursuing profits will take us further down this path. If access to legal services/justice is truly a fundamental right, then access must be made more affordable. Clearly this must involve lower legal fees - a significant reduction and cap of fees/hourly rates would likely yield positive results. I heard a Chief Justice speak on affordability and access to justice a few years ago and he stated something to the effect that he could not afford to hire himself.
  • Ken H
    We are unfortunately already in a situation where the practice of law is more of a business than a profession. Permitting ABS and involving investors with a focus on income is going in the opposite direction of where we should be headed. Other than some solicitors work, legal services are not affordable - particularly to the middle class. A better proposal would be to implement a cap on hourly rates/overall fees so legal services (often cited as a fundamental right by lawyers) would be accessible. Speaking on this topic I once heard a Chief Justice state that he could not afford to hire himself.
  • brian francis
    RE: “a cap on hourly rates/overall fees”
    Absolutely. Especially if this is true: “78% of Ontario’s legal bills are reduced at an assessment hearing” (http
  • Jeff Carr
    Is any commentator or any subject of the reserach actually a client? Studies that support the guild and the union ultimately support the status quo at the cost of the customer. It's not about lawyers and it's not about lawyers -- it's quite simply about the customer. Disputes and itigation arise from a human failure, a systemic flaw -- when we learn from those and start practicing prevention, we help the customer avoid legal problems. Regulatory issues arise largely from complexifcation. Yet disputes and de-complexification are the business of law -- the raw material needed to feed the beast of the legal delivery system. When the system becomes more interested in itself and transferrring wealth to itself, it should lose the protection of the guild and the union. ABS is not THE answer, but it is one answer.
  • Bradley Wright
    The only people criticising the study are those who remain blind to the undeniable harms of ABS. Delivering the profession into the hands of giant corporations is a disaster for the profession and the public. Even the lord chief justice of England has noticed that the public does not benefit from ABS. ABS is big entities getting together to screw little entities and the public. It is sold on specious grounds that it will somehow help little entities and the public, when all the evidence, history, economics, and common sense prove otherwise. ABS is the worst idea to hit the profession in centuries. The claim that if we do not adapt we will lose out is nonsense. We have always adapted and will always continue to adapt. What we really need to do to enhance access to justice is bring down the time and cost of litigation (the one real barrier), something ABS would in fact militate heavily against. No supporters of ABS expect their incomes to go down. So why do they support it?
  • brian francis
    RE: "What we really need to do to enhance access to justice is bring down the time and cost of litigation (the one real barrier)".
    I don't disagree with anything you say about ABS. But I ask this: when if ever will consumers see any real effort on the part of trial lawyers to bring down costs of (personal injury) litigation and to shorten the duration of litigation". There has been no effort made to end systemic costly and endless expert battles in the personal injury context. OTLA says that CFAs are the "ultimate" in access to justice (but they aren't always fair). The "premiums" charged in some cases might seem paltry to litigators are often seen as a staggering amount of money from the client's perspective. What, specifically, do you suggest as steps which might help speed up the pace of litigation and bring down costs in the personal injury context?
  • Alexander Malcolm
    The cause of the high litigation costs, and the endless expert battles which leads to those high costs, rests directly in the Insurance Act and the legislation. The legislation requires expert evidence in order to prove the case meets the threshold for entitlement to damages for pain and suffering. This is a mandatory requirement right in the legislation. It is the legislature itself, bowing to insurance company lobbyists who insisted on this provision in order to deter claims, which has led to the high costs of litigation and reduced access to justice. The changes must come from Queens Park; the trial lawyers can do nothing about it.
  • Rhona D
    I would agree that the changes needed to bring costs down for the thousands of auto accident claimants in the system is to change the Insurance Act. The Act is unreadable and not easily understood, creating a need for representation for even the smallest of claims. Thresholds in order to qualify for entitlement has financially benefited insurers, their expert witnesses and the lawyers. ABS will do nothing to correct this nor will it control costs when a delay/deny system will still be in place. We can thank the IBC and our inept legislators for that. From the client point of view I would be very concerned about who the 'new' partners would be. Insurance companies with all of their cash have already paved the way through our government to create the dysfunctional system we have right now, just imagine how successful they could be with shares and influence in the plaintiff end of the business.
  • Stephen Scott
    There are clear benefits, though no doubt some costs, to the consumer when sausages are made in a giant packing plant instead of a local charcutier. As to legal services, there are pressures enough on a lawyer who must answer to his partners and to partnership management. If he or she is answerable to corporate management, and, ultimately, to shareholders, with the pressures of quarterly earnings statements, it is hard to see how there can survive any real, as opposed to millusory, independence for counsel.

    Consider, for example, the situation where major clients of the firm will not particularly like the positions taken by a member of the firm for one client.
    Will that client's counsel not feel the pressure not to be too aggressive?

    Corporate ownership cannot but utterly transform the profession as we have known it.
  • Alexander Malcolm
    I agree with Stephen Scott. Public ownership will destroy the integrity of the lawyer in return for the bottom line. It will also squeeze out and destroy the small firm and solo practitioners. We have already witnessed what the giant fast food chains have done to mom and pop restaurants.
  • S. Aaron
    I have yet to hear a convincing argument in favour of ABS. It appears to fail miserably in terms of any "added value" on access to justice - particularly in the areas that are most in need (criminal and family).
  • A. Allen
    “a profession that is unwilling to consider proposals for business model modernization, to venture outside of its consultancy model, to enact innovation-positive policy, and to question its bricks, mortar, and mahogany from time to time will eventually lose its distinction.”
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