Arizona Become 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. 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. Both changes will take effect on January 1, 2021.
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. 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. 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. 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.
In reaching the decision, the Court asked “are these rules necessary to protect the public? Or are they restraints on the practice of law?” 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. 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. 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.
*J.D. Candidate, Class of 2021, Arizona State University Sandra Day O’Connor College of Law.
 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.
 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.
 Ariz. Admin. Off. of the Ct., supra note 1.
 Moran, supra note 4.
 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.
 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/.
 Ariz. Admin. Off. Of The Ct., supra note 1.
Skolnik, supra note 7.