Prof touts ABS plus

Adding fuel to an already-raging debate on alternative business structures, the Law Society of Upper Canada has released a report laying out the wide-ranging perspectives it has received from the profession so far on whether to let non-lawyers own law firms.

Some, like Cognition LLP, said alternative business structures would allow them to lock in capital more easily, thereby insulating firms from cash-flow troubles. Others, like the Ontario Trial Lawyers Association, said the role of alternative business structures in fostering innovation is “overstated.” Still others conjured up a new concept, dubbed “ABS plus,” that the law society should be considering.

According to University of Ottawa Faculty of Law Prof. David Wiseman, new models will only have a “trickle-down” benefit for poor Ontarians who lack access to justice. That’s why he suggested the law society should look into an enhanced version of alternative business structures.

“The idea is basically trying to work out if there’s a way to build any mechanisms into the regulatory framework for introducing ABS that might sort of leverage it to do more for low-income people,” Wiseman tells Law Times.

“Essentially, I think ABS might have some chance of improving the accessibility of legal services. But mostly that will be for people who can afford to pay — so probably more for middle-income people than low-income people — and so my sort of suggestion is that now is the time to think about whether there’s any way more might be done for allowing ABS to help a broader range of people.”

Determining the exact ways in which new models could provide a greater benefit to the poorest Ontarians requires more study, says Wiseman, but he can think of a couple of options. Should the law society allow alternative business structures and start regulating law firms, for example, it could impose a differential licensing-fee structure that provides an incentive to those who are doing more for low-income people, according to Wiseman.

Another option is to set up “some sort of fund” firms can apply to in order to get seed capital for ideas that might have particular benefit for the poor, says Wiseman.

The time to consider those options is now, he adds. If the law society approves alternative business structures without considering those issues, it might result in what he calls “collateral damage.”

“The other danger here is that if you’re in a situation where, to oversimplify, you have middle-income people against low-income people in legal disputes or whatever, then if ABS manages to improve the affordability of legal services for people living on middle income when they’re in a dispute with someone living on low income who hasn’t been able to benefit from more affordable services, you may be in fact making the situation worse off for low-income people,” he says.

According to the report, others groups that made submissions, such as LawPRO, suggested the idea of franchise law firms is “exciting.”

But many opponents of alternative business structures downplayed the value of new models in fostering technological advances.

“These highlighted that innovation is already taking place in Ontario’s legal systems without ABS. The Ontario Trial Lawyers Association (OTLA), the Criminal Lawyers’ Association (CLA), the Ontario Bar Association (OBA) and the Southwest Region Women’s Law Association, for example, noted that innovation is already occurring in law firm settings without needing to turn to external ownership through ABS,” the report noted.

“OBA noted that its membership did not report having experienced barriers (such as access to capital) as a result of the existing regulatory framework that would prevent them from practising law in an optimal way or from addressing unmet legal needs. OTLA noted that firms such as Cognition LLP and Conduit Law already exist in Ontario, and operate within the current regulatory framework.”

Interestingly, those same firms said they could benefit technologically from alternative business structures.

“Two firms (Cognition LLP and Conduit Law) indicated that regulatory barriers prevented or currently prevent them from structuring their practices in forms they view as preferable,” the report noted.

“For example, Cognition LLP advised that its ability to expand its in-house technological innovations is constrained by its inability to obtain external capital through alternative means. Some responses indicated that they would give serious consideration to embracing some level of non-lawyer ownership, or would already have done so had it been permissible to do so.”

Cognition LLP’s Joe Milstone says there’s still some way to go when it comes to using technology to increase efficiency and reduce the cost of legal services. “There are a lot of fascinating startups and new legal technology . . . but if you’re telling me that people are telling you and telling the law society we’re already fully exploring those, I don’t really believe that,” says Milstone, adding the profession is just scratching the surface in this area.

Milstone also says Cognition would appreciate the opportunity to have the financial and advisory contribution of “the most excellent business minds in Canada.”

Most of the risks and concerns expressed in the report are the ones the profession has been talking about lately. One such concern is the risk that firms may be unable to take on some cases, on a pro bono basis or otherwise, if they’re against the interests of the non-lawyer owners of legal service providers.

Both the OTLA and the Criminal Lawyers’ Association also told the law society the quality of services may dwindle under alternative business structures as the push to commoditize services could mean corporations will delegate work to law clerks and junior counsel instead of experienced lawyers.

The law society has so far received 40 responses on the topic from organizations and individuals. LSUC Treasurer Janet Minor expects the law society’s working group on the issue will come to Convocation with recommendations next year. “Before they do that, we will be expecting them to do more work. There’s more learning to be done and more conversation with the profession,” says Minor, adding the law society is “very pleased” with the response it’s getting on this issue so far.

While the law society is open to all submissions, it’s not treating them as “a vote” on alternative business structures, she says.

“It’s a sufficiently complex issue that having just a yes or a no doesn’t do justice to the kind of issues that have to be addressed,” she says.

For more, see "Why is personal injury bar so against ABS?" and "OTLA’s ABS submission couches own interest as protecting the public."

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