US regulatory reform: Utah sandbox leader John Lund gives us insight into the changes you can expect
On 13 August, the Utah Supreme Court made history by giving the green light to a regulatory sandbox that will allow, for the first time in the United States, law firms and corporations to experiment with new legal structures including allowing non-lawyers to practice and manage law firms. Legal IT Insider editor Caroline Hill spoke to John Lund, past president of the Utah Bar and co-chair of the Utah Implementation Task Force on Regulatory Reform, about what the changes mean and what we can expect over the next two years, including taking a look at the early applications.
Two years is the period that the Supreme Court has allowed before it conducts a review of what Lund describes as “an experiment to allow experimenting.”
John, congratulations on being given the green light for the sandbox, what kind of applications can we expect to see in the next two years?
Our Court said when these rules were put out for public comment that in that interim period we could begin to see applications – that’s a reaction to COVID-19 and the need to accelerate solutions due to the vast increase in evictions and other consequences of the pandemic. We’ve been able to take in applications and about a dozen applications so far have given us a chance to see what sort of ideas people have. We learned through the process that we didn’t make it clear that as a disbarred lawyer can slide in through the sandbox – that’s an inappropriate workaround. We have a dozen or so applicants and that has given us a good idea of the sorts of ideas people have.
There’s a bit of a spectrum – everything to date has been led by lawyers so people might be taking some aspect of divorce and automating that and guiding people through it. Instead of giving the form like LegalZoom can do they can give advice on what to say. They are levelling out who is giving the advice. It may be that someone has a simple question and it may be a non-lawyer who can finish that application. If it gets more complicated, they can pull in a lawyer. In the medical field we don’t have doctors do everything – if necessary, you can talk to the doctor.
Maybe half of the applications so far are from Utah lawyers who have an idea and outside investment for a firm run by non-lawyers. And at the simple end, there is a gentleman who does bankruptcy law and has a valued paralegal and would like him to have a percentage investment in the firm. Under our current law you can’t do that and it’s an example of an innovation that requires new rules but poses no risk to the consumer, which is our primary directive.
Given that the sandbox is only for two years, how will you encourage people to invest and feel safe in the knowledge that their investment won’t be wasted?
That’s a great question and it’s a bit of a balancing act: the standing order the Court entered has provisions recommending that a provider be able to exit the sandbox when they have demonstrated that their model is safe and does not need to stay in a provisional status. If someone is authorised to exit the sandbox their innovation will still have reporting requirements but will be a permanent thing. So even if the sandbox shuts down that person will have the ability to continue operating in that way.
So, in the worst-case instance that the sandbox is simply shut down, you could have deregulated firms that are run by non-lawyers continuing to exist?
Yes, you could. I like to think of it more as re-imagined regulation than deregulation!
That’s a fair point, in the UK we refer to it as deregulated or unregulated activity because it relates to reserved and non-reserved legal activities in the Legal Services Act.
Yes, we’ve used some data from Crispin Passmore [executive director of the Solicitors Regulation Authority in the UK] and looked at will preparation by lawyers versus unregulated advisers and the results aren’t any meaningfully different – as I understand the data, the users are more satisfied by the services provided by unregulated advisers.
There’s inevitably already speculation about the Big Four setting up in Utah, what are you thoughts on that?
It’s true that there is nothing stopping the Big Four from applying to set up in Utah, but if firms in Utah began to employ accountants that’s also open for consideration. There’s no predetermined idea about who does what in the sandbox. But we’ve not heard from the Big Four.
Is the main driver for the sandbox improving access to justice?
That is definitely the driver but also our regulatory objective is to find ways to create more affordable legal services. We’re talking about access to justice in the broader sense. There are a huge number of people who don’t think they can afford a lawyer. It isn’t just justice for the poor, it’s increasing access to justice across the board. And the second point is something our chief has been quite clear about: access to justice may mean more pedestrian things than it sounds. If it means ‘freedom of speech’ it sounds lofty, but for most people it means affordable legal advice to help you solve your problems, and these dozen or so applications so far are consumer focussed or if business focussed, then it’s a small business solution. We have a non-profit applying to take advantage of our clean slate law under which some people can clear their criminal record. People should be notified and given an opportunity to correct it but how do you notify them and help them through the expungement procedure? Can you use AI? Is that access to justice? What matters is that it reduces a problem for people.
Why do you think Utah is the first state to give the green light to this kind of sandbox?
I guess it’s a combination of factors. We’ve always had a great judiciary that is well led: they are not elected judges; they are appointed, and they take their position of responsibility to the public seriously. We all went to a conference [the Conference of Chief Justices] and Gillian Hadfield and Margaret Hagan and Rebecca Sandefur were speaking about needing to change the way that the law is regulated, that was in the Spring of 2018. We asked the Court to form this task force. It is a combination of a strong judiciary and good collaboration with their Bar. And we’re probably the right size: if you tried this in California or New York it’s a bigger fight. I hope we can pave the way and make it easier for others. We have recruited Gillian, Margaret, Rebecca and others to be on our task force, so we really have the best of the best and that is the advantage of being first!
Is there anything you feel people misunderstand about what you’re trying to achieve?
I guess the last piece about this is that we are not trying to regulate any other profession. It’s important because the court needs to stay in its lane and regulate legal services. If a psychologist and lawyer are working together, the psychologist has to do what they need to do to stay properly licensed – we’re only going to regulate the legal services side. It’s important to understand that we are not trying to undermine whatever you have to do to be an accountant – we are trying to stay ahead of that issue. We are regulating legal services and that’s an important distinction. Whoever is helping you to fill in forms is giving you legal advice and practising law and that’s within the courts bailiwick.
Will there be transparency around the applications you receive?
I’m sensing an increasing interest in who the applicants are. The commitment is to be transparent and we are working on the technology for posting people’s applications so they are out there and then because we didn’t ask that of the early applicants, we need to go back and ask them if they have a problem with that. But in the next weeks we hope to be posting about the applicants and the ideas they have. It’s important to have trust in what we’re doing and imitation is the best form of flattery.
It’s like a crazy man at a rock concert – they look crazy until one person joins and then another, and then the whole group are dancing wildly.
Our thanks to John for sharing his insights above. It is well worth reading the press release below, which gives details of the legal regulatory pilot programme, including a quote from task force co-chair Justice Deno Himonas, who said: “We cannot volunteer ourselves across the access-to-justice gap. We have spent billions of dollars trying this approach. It hasn’t worked. And hammering away at the problem with the same tools is Einstein’s very definition of insanity. What is needed is a market-based approach that simultaneously respects and protects consumer needs.”
TO TACKLE THE UNMET LEGAL NEEDS CRISIS, UTAH SUPREME COURT UNANIMOUSLY ENDORSES A PILOT PROGRAM TO ASSESS CHANGES TO THE GOVERNANCE OF THE PRACTICE OF LAW
In an historic vote, the Utah Supreme Court voted unanimously on Wednesday to authorize a pilot program to test pioneering changes to the practice of law and changes designed to address the access-to-justice crisis in America.
These changes allow individuals and entities to explore creative ways to safely allow lawyers and non-lawyers to practice law and to reduce constraints on how lawyers market and promote their services. In order to assess whether the changes are working as intended, the Supreme Court has authorized the core portions of these changes for a two-year period. At the conclusion of that time, the Supreme Court will carefully evaluate whether the program should continue.
The evaluation will be based on a review of data collected from those entities and individuals participating in the program. The Supreme Court’s willingness to experiment with innovation is an important step, especially now, because the need for more affordable legal help has reached crisis levels as a result of the COVID-19 pandemic and its economic fallout. Many Utahns are facing crushing challenges that require legal help, including lost jobs, bankruptcy and debt, and health and family crises. Now more than ever new legal services and providers are needed to ease this crisis of access to justice.
The Court’s Reform-leading Efforts The Utah Supreme Court has led the way on reforming the rules governing lawyers and the practice of law to increase Utahns’ access to legal help. Over the past two years, a task force established by the Supreme Court has researched and developed a model through which new and creative legal business models, services, and providers—under careful oversight—could offer safe and innovative legal services to Utahns. The resulting proposals, set out in the Supreme Court’s Standing Order 15 and associated revisions to the Rules of Professional Conduct, establish a regulatory sandbox for non-traditional legal providers and services, including entities with non-lawyer investment or ownership. The proposal also establishes an Office of Legal Services Innovation—a new office within the Supreme Court that will assess and recommend sandbox applicants to the Court, as well as oversee those applicants that are authorized by the Court to offer legal services. The rule changes and the sandbox, which the Supreme Court authorized pursuant to its plenary and exclusive constitutional mandate to govern the practice of law, represent perhaps the most promising effort by courts to tackle the access-to-justice crisis in the last hundred years.
Taking Input from All Sources into Account
Before voting on the changes, the Utah Supreme Court provided for a lengthy ninety-day comment period. Through the comment period and extensive outreach and research efforts, the Supreme Court and its task force were able to gather and take into account input on the proposals from the public, lawyers, the Utah Bar Commission—the body directly overseeing Utah’s
lawyers—and subject matter experts. As a direct result of this input, the Supreme Court made a number of important changes to the initial proposals. These changes included: (1) increasing transparency into the application and approval process, (2) adding clearer channels for complaints regarding the new legal services, (3) severely restricting any roles for disbarred or suspended lawyers and those with certain felony convictions, (4) more explicitly articulating the program’s access-to-justice goals, (5) and more clearly delineating that the program will sunset in two years absent further order of the Supreme Court.
A New Legal Frontier
Justice Deno Himonas who, along with John Lund, past-President of the Utah Bar, led the effort, summed up the need for innovative solutions in the face of America’s access-to-justice crisis as follows, “We cannot volunteer ourselves across the access-to-justice gap. We have spent billions of dollars trying this approach. It hasn’t worked. And hammering away at the problem with the same tools is Einstein’s very definition of insanity. What is needed is a market-based approach that simultaneously respects and protects consumer needs. That is the power and beauty of the Supreme Court’s rule changes and the legal regulatory sandbox.” Now, under the leadership of the Supreme Court and the Bar Commission, which will have an important role in the Innovation Office, Utah will be the first state in the nation to lay the foundation for a truly accessible and affordable, consumer-oriented legal services system.