Arizona Becomes the First State to Approve Nonlawyer Participants in and Ownership of Law Firms

By: Lingyun Ye^*

    On August 27, 2020, the Arizona Supreme Court voted to make two changes in the Court’s rules regulating the practice of law. The Court approved a licensure process that will allow nonlawyers, called “Legal Paraprofessionals (LPs)” to provide limited legal services to the public.[1] The Court also voted to eliminate ER 5.4  in the Rules of Professional Conduct which barred nonlawyers from sharing fees and having an economic interest in a law firm.[2] Both changes will take effect on January 1, 2021.[3]

    In adopting these changes, Arizona became the first state to authorize nonlawyers to co-own law firms. Similarly, the Utah Supreme Court voted earlier in August to establish a “sandbox” for improving and experimenting with the new way for nonlawyer ownership or investment in law firms and allowing nonlawyers to provide legal services to clients during a two-year pilot period.[4] However, the Arizona Supreme Court took the reformation a step further. Currently, the Arizona Administrative Office of the Courts is in the process of adopting a code to implement the new regulatory framework addressing the licensing of the new structure, called “Alternative Business Structures” and licensing of the LPs.[5] LPs will be able to practice in administrative law, family law, debt collection, and landlord-tenant disputes, with limited jurisdiction in civil and criminal matters.[6] LPs will have to meet education and experience requirements, pass a professional abilities examination, and pass a character and fitness process to get licensed to practice.[7]

    In reaching the decision, the Court asked “are these rules necessary to protect the public? Or are they restraints on the practice of law?”[8] The Court believes that the changes will boost business innovations in legal services to make them more accessible for more families and individuals at an affordable price.[9] At the same time, the Court stressed that the changes adopted must maintain the professional independence of lawyers and protect the public against unprofessional conduct.[10] As law firms are being creative to expand to related business services, like consultation, , the rule change of nonlawyer ownership and participation in law firms envisions even greater changes in the future of the legal market.[11]

*J.D. Candidate, Class of 2021, Arizona State University Sandra Day O’Connor College of Law.

[1] Press Release, Ariz. Admin. Off. Of The Ct., Arizona Supreme Court Makes Generational Advance in Access to Justice, (Aug. 27, 2020, http://www.azcourts.gov/Portals/201/Press%20Releases/2020Releases/082720RulesAgenda.pdf.

[2] Id.

[3] Id.

[4] Lyle Moran, Arizona approves nonlawyer ownership, nonlawyer licensees in access-to-justice reforms, Abajournal (Aug. 28, 2020, 2:20 PM CDT), https://www.abajournal.com/web/article/arizona-approves-alternative-business-structures-as-part-of-access-to-justice-reforms.

[5] Ariz. Admin. Off. of the Ct., supra note 1.

[6] Moran, supra note 4.

[7] Id.

[8] Sam Skolink, Arizona First State to OK Nonlawyer Ownership of Law Firms, Bloomberg Law (Aug. 28, 2020, 1:39 PM), https://www.bloomberglaw.com/document/X819TQ1K000000?bna_news_filter=business-and-practice&jcsearch=BNA%252000000174353bd7d2a5ffbdbb42cb0001#jcite.

[9] Bob Ambrogi, Arizona Is First State To Eliminate Ban On Nonlawyer Ownership Of Law Firms, Lawsites, (Aug. 31, 2020), https://jcorsmeier.wordpress.com/2020/09/02/arizona-becomes-first-u-s-state-to-authorize-non-lawyer-ownership-of-law-firms-and-fee-sharing/.

[10] Ariz. Admin. Off. Of The Ct., supra note 1.

[11]Skolnik, supra note 7.