Heated debate on alternative structures

Despite fears about providing legal services at places like Walmart, Law Society of Upper Canada benchers unanimously voted to launch a consultation on four options for non-lawyer ownership of law firms at Convocation on Feb. 27.

A working group presented Convocation with four different ways to proceed on the issue of non-lawyers owning law firms. The options followed an examination of what working group chairman Malcolm Mercer said had worked for Britain and Australia.

The four models proposed by the alternative business structures working group included allowing partial or unrestricted ownership by non-lawyers.

During a discussion on whether to seek the bar’s input on the four options, Mercer had to convince some reluctant benchers the options weren’t too narrow and that the Australian and British data was reliable.

“Not everything from Europe is good for Canada,” said Bencher Susan Hare, eliciting laughter from Convocation.

For ex-officio Bencher Gerald Swaye, the issue was with allowing non-lawyers to own law firms in any capacity.

“My view is the moment we permit our profession to go into the Walmarts or the Best Buy stores or any of the big-box places, somehow it loses some of our professionalism,” he said in a likely reference to Britain, where a supermarket chain is a large provider of legal services.

But Mercer said: “Professionalism isn’t about you. Professionalism is about protection of the public in terms of what we call legal ethics. It isn’t about your dignity or my dignity. It’s ensuring that services are effectively provided in ways that protect confidentiality, privilege, competence, and the like.”

According to Mercer, the current framework isn’t meeting 85 per cent of legal needs. Benchers debated that number throughout the discussion on alternative business structures with some suggesting the percentage comes without an explanation on exactly what kinds of legal needs the current system isn’t meeting.

“We do not permit anyone other than lawyers to serve the 85 per cent,” said Mercer, noting there’s a major gap in the provision of legal services that non-lawyer ownership could fill.

Ex-officio Bencher Bradley Wright presented a more boisterous opposition to the four proposals for alternative business structures, warning of “corporate concentration” once non-lawyers begin owning law firms.

“It’s already happening,” he said. “The people involved in it are already saying it’s happening and they predict it to worsen. If you get too great a corporate concentration, it becomes anticompetitive.”

To date, there hasn’t been a “fair debate” around alternative business structures since those touting the potential positive outcomes dominate the discussions, according to Wright. As an ex-officio bencher, Wright couldn’t participate in the vote.

For Hare, part of the trouble with the motion was that it only provided four options and could in the process restrict consultation on the matter.

“When you’re only taking four options to people, is it really consultation?” she asked.

But according to Mercer, the four options are in fact a broad question that will gauge whether or not the bar supports non-lawyer ownership in general. “What the four ask is, really, ‘Do you, and to what extent do you, support non-lawyer ownership?’” he said.

In the end, Hare supported the motion, saying, “I have been convinced.”

But there were also benchers who didn’t need convincing during the debate. “The sky hasn’t fallen in Australia because of [alternative business structures],” said Bencher Peter Wardle, who noted it’s time the legal industry caught up to the “sophisticated” ways the rest of the business world is moving towards.

“We are constrained right now by what is effectively a 19th-century structure that lawyers in this province can only associate in sole proprietorships and general partnerships with some variations. And that’s the real problem,” he said.

“The corporate world has gone on over the last 150 years and we have not and we’re living today in an antiquated structure.”

Bencher Alan Silverstein urged his colleagues to focus on the fact that the motion’s intent is exploration and not a definite stance on what alternative business structures should look like.

Part of the motion Convocation approved for consultation also dealt with the issue of compliance-based regulation and regulation of entities. Instead of a regulatory regime that relies on complaints against individual lawyers, the idea is that the law society should consider regulating law firms and other entities that provide legal services based on compliance with the rules.

After 18 months of research, the law society’s working group on alternative business structures concluded the status quo isn’t an option going forward.
In its report, the working group said it “concluded that there are negative consequences inherent in current regulatory limitations on the delivery of legal services in Ontario that could be addressed with the thoughtful liberalization of business structures.”

It added: “The existing tight regulatory restrictions on business structures are not justifiable given the lack of evidence that liberalization will cause harm.

“This is coupled with substantial evidence that business structure liberalization combined with entity regulation is likely to provide greater flexibility and more options for both licensees and the public.”

The four models proposed by the alternative business structures are:
• Permitting up to 49-per-cent ownership by non-licensees in entities only providing legal services.
• Restricting firms to providing legal services but with unrestricted ownership.
• Allowing up to 49 per cent non-licensee ownership and permitting firms to provide legal and non-legal services except those identified as posing a regulatory risk.
• Permitting unlimited non-licensee ownership and the provision of legal and any other services except where sufficient regulatory risk arises.

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