CBA Record

Chicago Bar Foundation Report

Self-Inf licted Barriers to Access to Justice: The Rules on Advertising and Investment By Bob Glaves, CBF Executive Director

M any thousands of Illinoisans who need or would benefit from legal assistance and can afford to pay something aren’t getting it. They may not recognize their problem as a legal one, or if they do, they too often don’t know where to go for quality legal help or whether it would be a cost-effective solution for them. At the same time, we have more lawyers than ever before, most of whom have capacity and interest in helping more paying clients. In economics, this is called a market failure, and our profession is compounding this failure by unnecessar- ily restraining market forces from fixing the problem. Our profession aggravates this market failure in access to justice in two funda- mental ways: our overly restrictive rules on marketing and advertising, and our rules limiting ownership and investment in law firms to only lawyers. In the rest of the business world, an untapped market like this is met with sophisticated marketing and advertising campaigns to educate and attract con- sumers, and new business models that are fueled by a variety of capital investment options. Lawyers, however, face a far more difficult challenge in doing this under the current Rules of Professional Conduct. And it is people in need of legal help who ultimately suffer.

The Shortsighted Rules Limiting Ownership While more flexible investment and owner- ship options for law firms are not a game changer for every access to justice chal- lenge, they have the potential to make a big impact in the consumer and small business markets. These potential clients—about 1.9 million in Cook County alone—have too much income to qualify for free legal help but are in the moderate-income market. This is the heart of our market failure. With notable exceptions such as personal injury cases, access to affordable legal help increasingly is out of reach for this broad segment of our community. A number of lawyers and firms are developing innovative models to make legal help more affordable and accessible through the CBF’s Justice Entrepreneurs Project and beyond. However, these lawyers and firms face huge challenges in accessing the capital that would be neces- sary for them to scale up their successful efforts due to the unyielding restrictions on outside investment. The Rule Restricting Outside Ownership and Investment Illinois and most of the country has long prohibited lawyers from sharing profits or attracting investments from anyone except other lawyers in the same law firm. As a result, not only are lawyers and firms prohibited from attracting outside inves-

tors, they also are prohibited from sharing profits or equity with other professionals they work with who do not happen to be lawyers. Rule 5.4 of Illinois Rules of Professional Conduct contains the limitation typical of others around the country, and the com- ments to the Rule reflect its underlying purpose: “These limitations are to protect the lawyer’s professional independence of judgment.” But is this kind of blunt prohibition really necessary to protect lawyers and their clients? Isn’t there a way to underscore those protections while still giving lawyers and firms access to the capital investment options other professions and businesses have access to and utilize? As a matter of fact, there is. Other Jurisdictions Already Are Proving This Can Be Done Australia and the United Kingdom are among many other jurisdictions that for years have permitted what are commonly referred to as “alternative business struc- tures” for law firms. These rules allow for outside investment and/or other profes- sionals to be able to share in law firm ownership and profits. Recognizing the potential for innova- tion here in the U.S. legal market, last year the ABA Commission on the Future of

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