How Global Legal Service Innovations Impact GCs

The world is moving toward loosening the reins on the practice of law to make legal services more accessible to more people, but the U.S. seems to be moving slowly and incrementally in its efforts, a panel of experts said Wednesday. 

The panelists spoke by videoconference about "multinational and multidisciplinary approaches to innovation in legal services" on Wednesday at the weeklong annual meeting of the Association of Corporate Counsel. 

Amy McConnell, head of legal operations at Vodafone Business in the U.K., said her country took several years to see any impact from regulatory changes allowing for alternative business structures (ABS), a legal practice that includes nonlawyer owners or managers. An example would be the Big Four accounting firms now offering legal services.

 "It has been helpful," McConnell added, "and many in-house teams have turned to that, for example to manage contracting work through alternative service providers. But generally, the feeling is that it [change] has not gone far enough." 

Moderator Gayle Gorvett, CEO and managing partner of GGorvett Consulting LLC in Atlanta, which serves as external general counsel to companies and boards, noted that U.S. lawyers are restricted from practicing with or sharing fees with nonlawyers. 

"We have to keep those rules in the back of mind to understand why states are reluctant to modernize," said Gorvett, who formerly served as international counsel for Brink's in Europe and at Nexans in Paris. 

Victoria Sahani, associate dean and law professor at Arizona State University's Sandra Day O'Connor College of Law, shared her views on so-called regulatory sandboxes where states are testing ABS ideas. 

"Arizona is the first state in the country to allow nonlawyer ownership of law firms in the form of an ABS," Sahani said. "This entity only has to have at least one lawyer owner, so the majority can be nonlawyers. That's a dramatic change in policy just since January." 

Washington, D.C., which has had limited nonlawyer ownership, is looking to expand along the lines of Arizona, panelists said. California and Illinois are both exploring the idea, while New York and Colorado formally oppose it. 

The group members said the American Bar Association signaled it is open to exploring change when it adopted formal opinion 499 last month. That opinion says a lawyer may "passively" invest in an ABS that includes nonlawyer owners, with some restrictions, including that the attorney does not practice law in the ABS. States are free to adopt the opinion. 

Gorvett called the ABA opinion "an obscure opening up." 

But panelist Mark Berman, a partner at Ganfer Shore Leeds & Zauderer LLP, part of the International Society of Primerus Law Fırms, labeled the opinion watershed moment," adding that embedded in it is that the attorney have no conflict of interest and no control of the ABS. 

Sahani said Australia has been a pioneer of third-party funding and nonlawyer ownership, including publicly traded law firms. "And third-party funders can own law firms there," she said. 

Gorvett wondered if the U.S. would ever go so far, noting that France, which has traditionally been conservative about such matters, is now allowing lawyers to create business entities with regulated professionals such as accountants auditors, and notaries. 

Panelist David Perla predicted the states will lead the way when it comes to third-party funding, unlike the U.K. where the national government did. Perla, cochief operating officer at litigation funder Burford Capital, formerly served as vice president of business and legal affairs at Monster.com. 

"Markets tend to move in reaction to capital," Perla said. "So you now have capital flowing into legal. And the states are the laboratories." 

He said the key to change will be what happens in states with large legal markets, such as California, New York, Illinois, Texas and Florida. "We'll have to wait and see." he added. 

He said that third-party funding has been a boon to corporations, which can have their legal fees and expenses covered with the funder receiving a share of any winning claim. 

Corporations can also monetize their claims and judgments, he said, and not wait through lengthy litigation to collect on them. "A number of name brand companies want to turn those assets into liquidity," Perla said.

 --Editing by Jill Coffey.