Legal tech: How do you innovate in a hyper-regulated space?

Improving the efficiency and accessibility of legal services is important not just for business but also for access to justice and the rule of law.  An ABA report last month highlighted the fact that the legal system is broken.  It recommended that lawyers should engage more with technology and be more innovative in their business practices. Innovation requires a willingness to push boundaries and experiment with bold new ideas.  However, the legal profession has long-standing and inflexible rules of conduct that favor the status quo over disruption.  At the moment, it seems as though the legal profession is struggling to innovate from within, and those who try to change it from outside are butting up against compliance issues with the ethical standards.  How should we try to innovate in such a tightly regulated industry?

One area where legal tech startups have been trying to innovate is by creating online platforms to connect people with a marketplace of attorneys.  Platforms such as LegalZoom, Rocket Lawyer, and UpCounsel each provide a marketplace for potential clients to connect with attorneys.  These models have the potential to make legal services more responsive and cost-competitive.  However, the challenges in expanding this model highlight some of the broader issues in legal tech.

Legal practice is primarily regulated by enforcing disciplinary codes of conduct against attorneys through state bar associations and state courts.  The ethical rules that are most relevant to online attorney marketplaces are:  unauthorized practice of law; restrictions on attorney referral services; and fee-splitting.  The general principle underlying these rules is that attorneys’ primary duties of loyalty and care are to their clients and the court.  In practice, this means that only attorneys should be involved in giving legal advice and no business arrangement should create a potential conflict with an attorney’s ethical duties.  

The current trend for online legal marketplaces pushes right up against all of these boundaries, and bar associations are looking closely at some of them.  Back in 2009, the Connecticut Disciplinary Counsel disciplined attorneys who were using the totalbankruptcy.com platform for participating in an unauthorized referral service.  As Carolyn Elefant pointed out at the time, this approach not only did a disservice to the public, it also put the blame solely on the participating attorneys.  If the platform really is reprehensible then the attorneys should be disciplined.  However, it seems unfair that the businesses profiting from creating the platforms are not subject to any sanction. 

Attempts to reform from within have not been terribly successful.  The American Bar Association had a very short dabble in legal tech collaboration when it partnered with Rocket Lawyer to provide an online referral service, ABA Law Connect, in California, Pennsylvania, and Illinois.  The pilot only lasted 3 months before it was unceremoniously killed on January 10, 2016 at the request of the Pennsylvania and Illinois bar associations. The Pennsylvania State Bar President, William Pugh, was quoted as saying that “It just flies in the face of what the ABA should be — promoting bread and butter mainstream lawyers across the country”.  Mark Cohen, Chief Executive Officer of Legalmosaic argues that the bottom line of Pennsylvania’s and Illinois’ position is that “it’s about lawyer protectionism, not public good”.  These bar associations are voluntary and Cohen argues that they therefore pander to their member base, rather than the greater public good in improving the accessibility of legal services.  The existing alternative to ABA Law Connect is formal attorney referral services through state bar associations.  These referral services are poorly publicized and do not have the smooth user interface offered by modern tech platforms.

So, if officially-sanctioned reforms struggle to get off the ground, and legal tech startups potentially put clients’ interests in jeopardy and attorneys at risk of disciplinary sanctions as they push the boundaries, how should we be innovating to improve access to justice?  A meaningful conversation needs to acknowledge the tension in order to be able to start developing practical steps.